Law on Business Companies - Serbia - United...

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18 Dec. 2003

LAW ON BUSINESS COMPANIES

Summary Table of Contents

PART ONE GENERAL PROVISIONS PART TWO PROVISIONS SPECIFIC TO EACH FORM OF COMPANY General Partnership Limited Partnership Limited Liability Company Joint Stock Company PART THREE LIQUIDATION OF A COMPANY PART FOUR LINKING OF COMPANIES AND PERSONS PART FIVE REORGANIZATION AND MAJOR TRANSACTIONS OF A COMPANY Merger Division Conversion Other Major Transactions Dissent and Appraisal PART SIX FINAL AND TRANSITIONAL PROVISIONS

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Complete Table of Contents

PART ONE

GENERAL PROVISIONS

CHAPTER 1. GENERAL PROVISIONS

Scope and Basic Principles

1 Scope of This Law 2 Use and Definitions of Terms 3 Forms of Companies 4 Branches of a Company 5 Duration of a Company 6 Purposes of a Company

Matters Concerning Founding of a Company

7 Articles of Association 8 When a Company Begins Existence 9 Registration and Publication 10 Effect of Registration and Publication against Third Parties 11 Action for Nullity of a Limited Liability Company of a Joint Stock Company

Liability of Founders and Other Persons

12 Liability for Obligations Incurred Before Registration 13 Liability for Contributions to Capital 14 Valuation of Contributions in Kind 15 Liability for Wrongful Abuse of Corporate Form

Registered Office and Name

16 Registered Office 17 Registered Name 18 Required Contents of Name 19 Abbreviated or Modified Name 20 Restrictions on Use of National and Official Names 21 Restrictions on Use of Personal Names 22 Use of Registered Name in Documents 23 Language of a Registered Name 24 Restriction on Transfer of Registered Name

Representatives and Representation 25 Representatives and Their Authority 26 General Provisions Concerning Procura 27 Issuance and Types of Procura 28 Procurator’s Signature 29 Termination of Procuration 30 Registration of Procura

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Duties to a Company

31 General Principles 32 Duty of Care and Business Judgment Rule 33 Duty of Loyalty and Conflicts of Interest 34 Personal Interest in an Act or Transaction 35 Action and Remedies Regarding Conflict of Interest Transactions 36 Duty Not to Compete With the Company 37 Duty to Keep Business Secrets 38 Persons Owing Duties 39 Increase or Decrease of Duties by a Company

Court Action to Enforce Duties

40 Direct Court Action by a Partner, Member or Shareholder 41 Derivative Court Action by a Limited Partner, Member or Shareholder 42 Simultaneous Direct and Derivative Actions 43 Actions in Certain Companies

Right to Information

44 Right Information and Access

Other General Provisions

45 Submission of Public Offering to Registry and to Publication 46 Disqualification of Certain Persons 47 Matters Concerning Courts 48 Prescription

PART TWO

PROVISIONS SPECIFIC TO EACH FORM OF COMPANY

CHAPTER 2. GENERAL PARTNERSHIP

General Provisions Concerning General Partnerships

49 Definition and Liability Principles 50 Freedom to Contract Principle 51 Articles of Association 52 Partnership Agreement 53 Relationship of Articles of Association and Partnership Agreement 54 Default Provisions of This Chapter

Legal Relations between Partners and With the Partnership

55 Articles of Association and Partnership Agreement May Govern 56 Contributions 57 Delays in Payment of Contribution 58 Increase or Reduction of Contribution 59 Right to Reimbursement for Expenses 60 Transfer of Interests among Partners

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61 Decision Making by Partners 62 Management of a Partnership 63 Management by More Than One Partner 64 Scope of Management Authority 65 Transfer of Management Authority 66 Resignation of Management Authority 67 Revocation of Management Authority 68 Sharing of Profit and Loss

Legal Relations of Partners and Partnership to Third Parties

69 Representation of a Partnership 70 Resignation of Representation Authority 71 Revocation of Representation Authority 72 Liability Defenses Available to a Partner 73 Setoff of Claims 74 Liability of a New Partner 75 Transfer of Partnership Interests to Third Parties 76 Liability Relating to Transfer

Dissolution of a Partnership and Exit of Partners

77 Events Causing Dissolution of a Partnership 78 Tacit Extension of Duration 79 Withdrawal of a Partner by Giving Notice 80 Dissolution of a Partnership by Court Decision 81 Expulsion of a Partner 82 Settlement of Accounts on Exit of a Partner 83 Treatment of Outstanding Transactions on Exit of a Partner 84 Procedure in Case of One Remaining Partner 85 Continuation of Partnership with Heirs 86 Entry into the Registry

CHAPTER 3. LIMITED PARTNERSHIP

87 Definition and Liability Principles 88 Application of General Partnership Provisions to Limited Partnerships 89 Articles of Association and Partnership Agreement 90 Amendment of Articles of Association 91 Limited Partnership Agreement 92 Relationship of Articles of Association and Limited Partnership Agreement 93 Applicable Provisions 94 Contributions 95 Transfer on Interests 96 Management; Limited Partner May Not Manage 97 Sharing of Profit and Loss 98 Representation; Limited Partner May Not Represent 99 Liability of a Limited Partner as a General Partner in Certain Cases 100 Termination of Partner Status and Transformation of Legal Form

CHAPTER 4. LIMITED LIABILITY COMPANY

General Provisions Concerning Limited Liability Companies

101 Definition and Liability Principles 102 Freedom to Contract Principle

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103 Articles of Association 104 Company Agreement 105 Relationship of Articles of Association and Company Agreement 106 Default Provisions of This Chapter 107 Founding Costs 108 Nature of Contributions 109 Calls for Additional Contributions

Capital

110 Minimum Initial Capital 111 Increase of Capital 112 Decrease of Capital

Shares

113 One Share per Member 114 Voting and Distribution Rights of Shares 115 Certain Other Characteristics of Shares 116 Co-Ownership of a Share 117 Book of Shares 118 Registration of Shares 119 A Company’s Acquisition of its Own Shares 120 Pledges of Shares 121 Loans by a Company to Acquire its Shares Prohibited 122 Cancellation of Shares

Transfer of Shares

123 General Restriction on Transfer 124 Right of First Refusal on Transfer to Third Parties 125 Transfer in Court Proceedings 126 Certain Requirements for and Consequences of Transfer 127 Division and Transfer in Part of a Share 128 Pledge of a Share by a Member

Distributions to Members

129 Annual Financial Statements 130 General Provisions Regarding Distributions 131 Restrictions on Distributions 132 Personal Liability for Prohibited Distributions 133 Certain Loans for Capital to be Subordinated

Members’ Meetings and Decision Making

134 General Provisions Concerning Members’ Meetings 135 Competence of the Members’ Meeting 136 Convening a Meeting by the Director 137 Extraordinary Meeting 138 Notice and Agenda 139 Objection to Procedure 140 Action without a Formally-Convened Meeting 141 Voting by Proxy 142 Quorum 143 Conduct of a Members’ Meeting 144 Required Majorities for Decision

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145 Meeting by Telephone, Voting by Mail, and Actions without a Meeting 146 Open and Secret Ballot 147 Disqualification to Vote 148 Minutes 149 Book of Decisions

Declaration of Nullity of a Meetings’ Decision

150 Appropriate Application

Directors and Board of Directors

151 General Provisions Concerning Directors 152 Election of Directors 153 Number of Directors and Vacancies 154 Chairman of the Board 155 Competence of the Board 156 Liability for Business Books 157 Certain Actions by More Than One Director 158 Meetings of the Board 159 Action Without a Meeting 160 Quorum and Majority 161 Disqualification to Vote 162 Committees 163 Minutes 164 Resignation of a Director 165 Removal of a Director

Supervisory Bodies

166 Internal Auditor or Audit Committee 167 Election and Removal 168 Competence and Method of Work

Auditors

169 Company Auditor 170 Appropriate Application

Amendment of Articles of Association and Company Agreement

171 Required Agreement for Amendment 172 Retention of Company Documents and Information 173 Access to Records and Information

Rights Based on Termination of a Members’ Membership in a Company and Termination of

Company

174 Events Causing Termination of Membership 175 General Provisions Concerning Withdrawal of Expulsion of a Member 176 Withdrawal of a Member for Justified Reasons 177 Expulsion of a Member 178 Consequences of Termination of Membership

Dissolution of a Company

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179 Events Causing Dissolution 180 Dissolution of a Single-Member Company 181 Dissolution and Other Remedies by a Court on Motion of Members

CHAPTER 5. JOINT STOCK COMPANY

General Provisions

182 Definition and Liability Principles 183 Articles of Association 184 By-Laws 185 Relationship of Articles of Association and By-laws 186 Special Benefits 187 Founding Costs 188 Nature of Contributions; Loans to Acquire Shares Prohibited 189 Valuation of Contributions 190 Payment of Contributions

Closed and Open Companies

191 General Provisions Concerning Closed and open Companies 192 Closed Company 193 Transfer of Shares of a Closed Company 194 Open Company 195 Founding Offering of Shares of an Open Company 196 Convening the Assembly 197 Procedures at the Founding Assembly 198 Consequences of Failing to Hold the Founding Assembly 199 Presiding and Minutes at the Founding Assembly 200 Matters to be Decided at the Founding Assembly 201 Voting at the Founding Assembly

Shares and Other Securities of a Company

202 Ordinary and Preferred Shares 203 Authorized and Issued Shares 204 Registration of Issuance and Ownership 205 Effect of Registration


206 Rights of Holders of Ordinary Shares 207 Rights of Holders of Preferred Shares 208 Securities Other Than Shares; Convertible Securities, Options and Bonds 209 Dividend and Voting Rights of Partly-Paid Shares 210 Amount of Consideration for Shares 211 Preemptive Rights to Acquire New Shares 212 Co-ownership of a Share 213 Questionnaire 214 Duty to Respond to Questions on Real Interest 215 Report of Questionnaire Results 216 Sanctions 217 Investigation by Competent Authority 218 General Provisions Concerning Dividends 219 Dividends Payable in Money, Shares or Other Property

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220 Restriction on Payment of Interim Dividends by an Open Company 221 Record Date for Dividends and Other Distributions 222 Procedures for Authorization and Payment of Dividends

Dividends and Other Distributions to Shareholders

223 Subscription to a Company’s Own Shares or Parent’s Shares Prohibited 224 General Provisions for a Company’s Acquisition of its Own Shares 225 Procedures for Company’s Acquisition of its Own Shares 226 Procedures for Acquisition of Shares Pro Rata From All Shareholders 227 Status of Reacquired Shares 228 Pledge of Own Shares Prohibited 229 Registration of Acquisition or Pledge 230 Grounds for Redemption and Annulment 231 Price for Redemption 232 Registration of Redemption 233 Restrictions on Payment of Dividends and Other Distributions 234 Personal Liability for Prohibited Distributions 235 Certain Loans for Capital to be Subordinated 236 Minimum Initial Capital 237 Minimum Nominal Value of Shares 238 Consolidation and Distribution of Shares 239 Maintenance of Initial Capital of an Open Company 240 Decision

Capital of a Company 241 Method of Increase 242 Closed and Open Issuance 243 Value of Shares from New Issue 244 Increase of Initial Capital with Contributions in Money and/or in Kind 245 Entering the Decision into Registry and Publishing 246 Subscription of New Shares 247 Reporting to the Securities Committee and Recording into the Registry 248 Acquisition of Shares and Confirmation 249 Entry into Registry, Publication and Effect 250 Assumptions 251 Content of the Decision 252 Entry into Registry, Publishing and Effect 253 Statement on Exercising the Right of Registration and Conversion 254 Informing the Securities Commission and Entry into the Central Registry 255 Acquisition and Confirmation of Shares 256 Entering Increase into Registry and Publishing 257 Assumptions 258 Holders of Rights Arising from an Increase in Initial Capital from the Company’s Assets 259 Fractional Shares 260 The Right to Dividend and to a Share in the Assets of a Company in Liquidation 261 Notification of the Securities Commission and Entry into Central Registry 262 Acquisition of Shares and Share Certificates 263 Registration, Publication and Effectiveness of the Decision 264 Decision 265 Type of Reduction 266 Methods 267 Withdrawal and Cancellation of Shares 268 Relevance 269 Principle of Equality 270 Filing with the Registry and Public Notice

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271 Notice of Resolution and Protection of Creditors’ Rights 272 Filing with the Central Securities Registry 273 Filing with the Registry, Public Notice and Effective Date 274 Principle 275 Limit 276 Instruction 277 The Lowest Amount of Decrease (Reduction)

Shareholders’ Assembly

278 Exercising Shareholders’ Rights 279 Annual Assembly 280 Extraordinary Assembly and Convening by Minority Shareholders 281 Court-Ordered Assembly 282 Extraordinary Assembly of Closed Company 283 Extraordinary Assembly in Financial Crisis 284 Regulations 285 Waiver of Notice in Writing 286 Waiver by Attendance 287 Agenda for an Assembly 288 Chairman at an Assembly 289 Record Date 290 Voting in Person or by Proxy 291 Verification 292 Right of Shareholders to Information at Assembly 293 Competence of the Assembly 294 Approval of Financial Statements by the Shareholders’ Assembly 295 Quorum Required for a Vote 296 Vote Required for a Decision; Definition of Qualified Majority Vote 297 Voting Rights of a Share 298 Certain Voting Agreements Prohibited 299 Meeting by Conference Telephone 300 Voting in Open and by Secret Ballot 301 Voting Rights of Specific Types of Shareholders 302 Effective Date of Assembly Decisions 303 Disqualification to vote in Certain Cases 304 Record of an Assembly 305 Invalidity Grounds 306 Invalidity of Election of Board Members 307 Invalidity of Decision on Adoption of Annual Financial Reports 308 Exceptions 309 Charges and the Procedure for Establishing Invalidity

Board of Directors, Management Body and Supervisory Bodies

310 Obligations 311 Number of Directors 312 Election of Directors and Cumulative Voting 313 Independent and Non-Executive Directors 314 Term of Office of Directors 315 Filling of Vacancies 316 Chairman of the Board 317 Competence of the Board 318 Meetings of the Board 319 Meeting by Conference Telephone and Actions Without a Meeting 320 Committees of the Board

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321 Corporate Governance Guidelines 322 Quorum and Vote Required for Decisions 323 Disqualification to Vote in Certain Cases 324 Records of Meetings 325 Definition 326 President of the Management Body and Representation of the Company 327 Reporting by the Board to the Shareholders’ Assembly and by the Management Body to the Board 328 Remuneration Principles 329 Resignation of a Director 330 Removal of a Director 331 Personal Liability Cases 332 Supervisory Board, Internal Auditor or Audit Committee 333 Membership, Election and Removal of Supervisory Board 334 Membership, Election and Removal of Internal Auditor and Audit Committee 335 Competence and Method of Work 336 Auditor 337 Appointment of Fiduciary Agent-Expert 338 Authorization of Fiduciary Agent-Expert 339 Report of Fiduciary Agent-Expert 340 Corporate Secretary

Amendment of the Articles of Association

341 Amendment by the Board of Directors 342 Amendment by the Board and the Shareholders’ Assembly 343 Separate Group Voting by a Type or Class of Shares 344 Registration and Effective Time of an Amendment

Company Documents and Information

345 Retention of Company Documents and Information 346 Access to Records and Information 347 Access by Court Order


348 Events Causing Dissolution 349 Dissolution and Other Remedies by a Court on Motion of Shareholders

PART THREE

LIQUIDATION OF A COMPANY

CHAPTER 6. LIQUIDATION OF A COMPANY

350 General Provision Concerning Liquidation 351 Decision to Liquidate 352 Entry into the Registry and Publication 353 Individual Notice to Known Creditors 354 Published Notice to All Creditors 355 Activity of a Company During Liquidation 356 The Liquidators 357 Removal of Liquidators 358 Entry of the Appointment and Removal of Liquidators into the Registry 359 Activities of the Liquidators 360 Liquidation Balance Sheet

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361 Termination of Liquidation and Commencement of Bankruptcy 362 Report Following Settlement With Creditors 363 Distribution to Partners, Members or Shareholders 364 Remuneration of Liquidators 365 Finalization 366 Accountability of Liquidators for Damage 367 Notifying the Tax Administration

PART FOUR

LINKING BUSINESS COMPANIES AND PERSONS

CHAPTER 7. LINKED COMPANIES AND PERSONS

368 Definition and Types of Linked Companies 369 Control by Share in Capital 370 Acting in Concert 371 Special Provisions for Companies Linked by Capital Share 372 Entry into Registry 373 Business Name 374 Liability of Controlling Company and Directors 375 Reports to Members or Shareholders of a Dependent Company 376 Contract on Management and/or Transfer of Profit 377 Contents of and Liabilities Under the Contract 378 Required Approval of the Contract 379 Termination and Registration of Termination

PART FIVE

REORGANIZATION AND MAJOR TRANSACTIONS OF A COMPANY

CHAPTER 8. STATUS CHANGES

Merger 380 Definition and Types of Status Changes 381 Prohibition of Certain Status Changes 382 Settlement Account 383 Status Change During Liquidation 384 Plan of Merger By Acquisition 385 Board of Directors Report 386 Auditors’ Report 387 Supervisory Board Report 388 Announcement of Plan (Notifying Shareholders) 389 Examination of Documents 390 Shareholders’ Assembly Approval 391 Merger Without Decision of the Acquiring Company’s Assembly 392 Capital Increase 393 Prohibition of Creating Phantom Capital 394 Acquiring Company’s Initial Value 395 Protection of Creditors – Right to Guarantees and Payment 396 Protection of Bondholders 397 Protection of Holders of Securities Other Than Shares 398 Registration 399 Publication 400 Effect of Merger

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401 Simplified Merger by Acquisition 402 Merger With a Wholly-Owned Company 403 Merger by Acquisition of Limited Liability Companies 404 Preparation for Members’ Meeting 405 Merger by Acquisition of Joint Stock Company and Limited Liability Company 406 Joint Stock Company as the Company to be Acquired 407 Limited Liability Company as the Company to be Acquired 408 Merger of Joint Stock Companies by Formation of a New Company 409 Merger of Limited Liability Companies by Formation of a New Company 410 Merger of Joint Stock Companies and Limited Liability Companies by Formation of a New

Company

Division and Separation 411 Applicability of Other Articles 412 Draft Plan of Division by Acquisition 413 Unallocated Assets and Liabilities 414 Shareholders’ Assembly Approval 415 Division Without Decision of a Recipient Company 416 Share Exchange 417 Protection of Creditors 418 Registration 419 Publication 420 Effect of Division 421 Division by Formation of a New Company 422 Separation – Applicability of Other Articles 423 Division and Separation of Limited Liability Company 424 Division and Separation of Joint Stock Company and Limited Liability Company 425 Status Changes Involving General or Limited Partnership

CHAPTER 9. CONVERSION 426 Definition 427 Conversion and Liquidation 428 Registration and Publication 429 Exemption from Court Annulment 430 Conversion of Joint Stock Company into Limited Liability Company 431 Contents of the Conversion Plan 432 Registration and Coming into Force 433 Legal Effect of Conversion 434 Conversion of a Joint Stock Company into a Partnership or Limited Partnership 435 Effect of Registration and Publication 436 Conversion of Limited Liability Company into Joint Stock Company 437 Registration and Appointment of the Bodies 438 Conversion of Contributions into Shares 439 Conversion of Limited Liability Company into General or Limited Partnership 440 Conversion of General or Limited Partnership into Joint Stock Company or Limited Liability

Comapany 441 Conversion of General into Limited Partnership and Vice Versa

CHAPTER 10. OTHER MAJOR TRANSACTIONS 442 Definition of Major Transactions 443 Procedure for Approval of Major Transaction CHAPTER 11. RIGHT TO DISSENT AND RECEIVE PAYMENT FOR SHARES

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444 Mandatory Right of Shareholders of a Joint Stock Company 445 Determining Full Value 446 Optional Right of Members of a Limited Liability Company or Partners in a Partnership

PART SIX

TRANSITIONAL AND FINAL PROVISIONS

CHAPTER 12. TRANSITIONAL AND FINAL PROVISIONS

General

447 Continued Work of Enterprises and Duty to Harmonize With This Law 448 Institution of Proceedings

Transitional Status of Companies With Socially Owned Capital

449 Socially Owned Capital 450 A Company With Majority Owned Capital and a Socially Owned Company 451 Use of the Rights Contained in Shares on the Basis of Socially Owned Capital by Employees 452 Use of the Rights Contained in Shares of Socially Owned Capital by the State 453 Privatization and Termination of Socially Owned Capital 454 Controlling Company and Subordinate Company With Socially Owned Capital 455 Expiration of Privatization Terms

Transitional Status of a Public Company

456 Appraisal of Capital and Entry into the Registry 457 Change of Name, Bodies and Founding Acts 458 Corporatization

Limitations on Founding of Companies

459 Limitations on Founders, Etc.

Final Transitional Provisions

460 Cessation of Existing Law 461 Entry into Force of This Law

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(17 December 2003)

LAW ON BUSINESS COMPANIES

(DRAFT)

(SERBIA)

PART ONE

Chapter 1

GENERAL PROVISIONS

Title 1

Scope and Certain Basic Principles

Article 1 Scope of This Law

This Law shall regulate the founding, the managing, the rights and obligations of founders, partners, members and shareholders, the reorganization (changes of status and legal form), and the termination through voluntary liquidation, of business companies.

Article 2

Use and Definitions of Terms In this Law, unless the context requires otherwise:

1) the singular includes the plural and the plural includes the singular; 2) the use of any gender refers to all genders; 3) “company” means a business company regulated by this Law; 4) “director” means and includes the director, a member of a company’s board of directors,

supervisory board or management body; 5) “person” means an individual or an entity. 6) “knowledge,” “known to” and similar words with respect to a person and a fact or circumstance

means that the person: 1) actually knows the fact or circumstance;

2) has received notice of the fact or circumstance, whether or not the person actually knows the fact or circumstance; or

3) should have known the fact or circumstance from all other facts and circumstances known to the person at the time.

Notwithstanding the foregoing, Article 10 of this Law shall apply concerning a person’s knowledge of information registered or published as stated in that Article; and

7) “distribution” means a transfer by a company of money or other property (except its own shares) to its partners, members or shareholders with reapect to their partnership interests or shares in the

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company. A distribution may be in the form of a distribution of profit or other dividend; an acquisition by the company of its own interests or shares by purchase, redemption or otherwise; a distribution in liquidation of the company; or otherwise.

Article 3

Forms of Companies The forms of companies are general partnership, limited partnership, limited liability company and

joint stock company.

Article 4 Branches of a Company

(1) A company, domestic or foreign, may establish one or more branches. (2) A branch is a place of business of a company which does not have legal personality or legal existence separate from that of the company. A branch may have a degree of permanence and a management and may transact business with third parties in the name of and on behalf of the company. (3) A branch of a company must be registered as required by the Law on Registration.

Article 5

Duration of a Company The duration of a company is perpetual unless a shorter time period is specified in its Articles of

Association, in which case the duration of the company is that shorter time period. A company’s Articles of Association may state that its duration shall end upon the occurrence of a particular event or accomplishment of a particular purpose.

Article 6

Purposes of a Company A company may engage in any lawful activity subject, however, to obtaining permits or approvals

that are required for specific activities, and subject to any law that states that a company which conducts specified activities must be organized in a particular form.

Title 2

Matters Concerning Founding of a Company

Article 7

Articles of Association (1) The founding document of a company is its Articles of Association. (2) The persons who are responsible for founding a company are herein called the company’s “founders.” All of the founders of a company must sign its initial Articles of Association. (3) The signatures of the founders on the Articles of Association must be certified. (4) A company’s Articles of Association must include the contents which are required by this Law for the form of that company. (5) If a permit is required from a competent body for conducting a company’s business, that is deemed separate from the Articles of Association.

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Title 3

Registration and Publication

Article 8

When a Company Begins its Existence A company begins its existence as a legal entity upon its registration in the Registry as prescribed

in the Law on Registration.

Article 9 Registration and Publication

(1) The Law on Registration shall regulate the registration and publication procedure and the filing of documents required for the founding of a company. (2) Information which is required to be registered in the Registry may also be published on the website of the Registry or in the Official Gazette.

Article 10 Effects of Registration and Publication Against Third Parties

(1) Third parties shall be deemed to have knowledge of registered documents and information regarding the company after such documents or information has been published either in full or partial text or by means of a reference to the registered document. Third parties shall also be deemed to have such knowledge whenever they have actual knowledge thereof, but the company shall have the burden of proving that they have actual knowledge. However, with regard to transactions taking place before the sixteenth day following the publication, the documents and particulars shall not be relied on as against third parties who prove that it was impossible for them to have had knowledge thereof. (2) If information published by a company is inconsistent with information filed by the company in the Registry, the company may not rely on the former as against third parties. Third parties may, however, rely thereon, unless the company proves that they had knowledge of the information filed in the Registry. (3) Third parties may, moreover, always rely on any documents and particulars in respect of which the disclosure formalities have not yet been completed, except where non-disclosure causes them not to have effect.

Article 11 Action for Nullity of a Limited Liability Company or a Joint Stock Company

(1) If the Articles of Association of a limited liability company or a joint stock company does not state the amount of the company’s initial capital or the business purpose of the company or if such Articles of Association state a business purpose which is illegal, any member, shareholder or director of the company may file a complaint in court requesting that the company’s registration be declared invalid. (2) If the basis for requesting nullity can be remedied, the competent court may set a deadline for such remedying which shall be not later than 90 days after the complaint is filed. (3) If such a company’s registration is declared a nullity, the company shall be liquidated in accordance with this Law. (4) Nullity of a company’s registration shall have no adverse effect on transactions of the company concluded with third parties. (5) Nullity of a company’s registration shall have no effect of the obligation of partners, members or shareholders to make agreed contributions to capital, to the extent that such contributions are necessary to satisfy creditors. (6) A company shall without delay submit to the Registry a certified copy of any complaint requesting nullity, for the purpose of giving notice of the complaint and request. The competent court shall without delay submit to the Registry any decision regarding nullity, for the purpose of registering the nullity or the purpose of deleting the previous notice of the complaint, as the case may be.

Title 4

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Liability of Founders and Other Persons

Article 12

Liability for Obligations Incurred Before Registration (1) If action is taken by founders or other persons before a company’s legal existence has begun, the persons who acted shall be personally liable therefor (and persons who acted jointly shall be liable jointly and severally therefor) unless otherwise agreed with third parties who have a claim for such obligations. (2) A company shall be jointly and severally liable for such obligations if it assumes them after registration in accordance with this Law.

Article 13

Liability for Contributions to Capital (1) A partner, member or shareholder of a company is obligated to the company to pay in full all contributions to capital in money or in kind when due as required by the company’s Articles of Association and by any other agreement of that person. If such person’s interest in a company is transferred to another person, the transferor and the transferee shall be jointly and severally liable for the transferor’s obligations prior to the time of transfer to make contributions. (2) A person who fails to comply with his obligations to a company with respect to the company’s founding shall be liable to the company for any damages resulting from such failure. (3) The Law on Obligations as well as this Law shall apply with respect to a company’ enforcement of an obligation to make a contribution to capital. (4) If a person does not make a contribution that is to be made in kind, he is obligated at the company’s option to contribute cash equal to the value of the contribution in kind that has not been made. (5) All contributions which have been made to a company are the property of the company and may not be used by partners, members or shareholders as their personal property. (6) A company may not release or reduce its claims under this Article except with the consent of such creditors. (7) A person shall not be entitled to refund of or payment of interest on a contribution that has been made. A company’s payment of a distribution or acquisition of a share in accordance with Articles 131 , or 233shall not be considered a refund or a payment of interest for this purpose. (8) A claim by or on behalf of a company under this Article may be brought by a legal representative of the company or, in case of the latter’s failure to do so, by one or more partners, members or shareholders who represent 5% or more of the company’s capital.

Article 14

Valuation of Contributions in Kind (1) The value of contributions in kind to a general partnership, a limited partnership, a limited liability company or a closed joint stock company whose Articles of Association does not provide otherwise under Article 189 of this Law shall be determined by agreement of the partners, members or shareholders in accordance with any applicable provisions of the Articles of Association. As used in this Law, “contributions in kind” means non-monetary contributions to a company’s capital, including contributions which consist of property, rights, labor or services (when contributions of labor or services are permitted) and shares of another company. (2) If partners, members or shareholders referred to in paragraph (1) of this Article do not agree on the value of a contribution in kind they may request the competent court to appoint a valuation expert for that purpose and they may agree to submit that determination to such a valuation expert or to another third party. (3) The value of contributions in kind to an open joint stock company shall be determined by an authorized independent appraiser appointed by the founders of the board of directors from the list approved by the competent court. If there is disagreement on the appointment the court may appoint the appraiser in a non-contentious proceeding.

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(3) The value of contributions in kind shall in all cases be determined in accordance with any applicable provisions of the Law on Accounting and audit. The same applies with respect to the liability of authorized independent appraisers.

Article 15

Liability for Wrongful Abuse of Legal Form (1) A limited partner of a limited partnership, a member of a limited liability company, and a shareholder of a joint stock company may be held personally liable for obligations of the company if he knowingly and wrongfully abuses the company form for illegal or fraudulent purposes or by treating the assets of the company as though they were his personal assets and as though the company did not exist. (2) In cases referred to in paragraph (1) of this Article, such person shall be jointly and severally liable with the company. (3) Such a holding may be made only by a competent court in consideration of all the circumstances. In making its determination the court shall consider the general policy that the principle of limited liability should be respected except in exceptional cases.

Title 5

Registered Office and Name

Article 16 Registered Office

(1) The “registered office” of a company means the company’s registered office at the address stated in the company’s Articles of Association. (2) The registered office of a company shall be the principal location from which the company’s business is conducted. (3) All notices, demands, correspondence and mail to a company, including documents beginning or concerning litigation against the company, may be delivered to the company’s registered office and when so delivered during regular business hours shall be considered received by the company.

Article 17 Registered Name

(1) A company shall use its registered name in communications with other parties and shall display its registered name in its registered office and in every branch office. (2) A company's registered name must be clearly distinguishable from the name of any other company. (3) A company's registered name may not contain any information capable of misleading the public with respect to the business of the company.

Article 18 Required Contents of Name

(1) The registered name of a general partnership must include the word "partnership" or the abbreviations "o.d." or »od« in capital or lower case letters. (2) The registered name of a limited partnership must include the words "limited partnership" or the abbreviations "k.d." or »kd« in capital or lower case letters. (3) The registered name of a limited liability company must include the words »limited liability company« or the abbreviations »d.o.o.« or »doo« in capital or lower case letters. (4) The registered name of a joint stock company must include the words "limited liability company« or the abbreviations "a.d." or »ad« in capital or lower case letters. (5) The registered name of a company in liquidation must include the words »in liquidation«.

Article 19 Abbreviated or Modified Name

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A company may do business using one or more abbreviated or modified versions of its name if such abbreviated or modified name is stated in its Articles of Association and also complies with the requirements of Articles 18-22 of this Law.

Article 20 Restrictions on Use of National and Official Names

(1) The registered name of a company may include a name of a home country or territorial unit or its coat of arms, flag or other state logo or mark, but only with any required consent of the competent governmental authority of that country or territorial unit. (2) The registered name of a company may include the name or symbols of a foreign state or an international organisation only if permitted under the laws or regulations of that foreign state or organisation. (3) The registered name of a company may not include or imitate official marks used for quality control or product warranty.

Article 21 Restrictions on Use of Personal Names

(1) The registered name of a company may include the name-, of a natural person only with his consent or, in the case of a deceased person, only with the consent of all immediate heirs of such person. (2) If a person's name is used in violation of paragraph (1) of this Article, that person's name shall be deleted from the company's name in the Registry upon the request of that person or, if applicable, his heirs.

Article 22 Use of Registered Name in Documents

(1) Letters and forms addressed to third parties by a company, including those in electronic form, shall provide the following information: registered name of the company, registered office of the company, Registry where the company is registered and number of the company's file, registered name and registered office of an institution where the company has its priincipal bank account, and bank account number and tax number of the company. (2) Such letters and forms of a limited liability company and of a closed or open joint stock company shall also state the amount of subscribed and paid-in capital of the company.

Article 23 Language of a Registered Name

(1) The registered name of a company shall be in the Serbian language and in the alphabet officially used. (2) Notwithstanding the foregoing, the registered name of a company may include foreign words if they are in the company’s trade or service mark registered in Serbia, or if it is a name commonly used in the Serbian language, if there is no adequate word for it in Serbian language, or in the case of a word from a dead language.

Article 24

Restriction on Transfer of Registered Name The registered name of a company may be transferred to another person only if that person is a

successor to all or substantially all of the transferor’s business, assets and liabilities.

Title 6

Representatives and Representation

Article 25 Representatives and Their Authority

(1) Partners in a general partnership and general partners in a limited partnership shall represent the partnership as provided in Articles 69 and 88, paragraph (2) of this Law and in any applicable provisions of the partnership’s Articles of Association. A limited liability company and a joint stock company shall be represented by one or more directors as provided in Articles 151 paragraph (1), 155 paragraph (1) point

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11), 157 paragraph (1) and 326 paragraph (4) of this Law and any applicable provisions of the company’s Articles of Association. Such representation shall apply in any kind of judicial or non-judicial transaction. (2) A representative of a company has a duty to the company to observe and act in compliance with any limitations on his authority which are stated in the company’s Articles of Association, company agreement, by-laws or any decision of the company. A representative of a company who knowingly exceeds such limitations shall be personally liable for damages caused thereby to the company and to any third party with whom he has dealt. However, a company may not rely on such limitations against a third party unless the third party knew or under the circumstances should have known of the limitations. (3) An act of a representative of a company shall be binding on the company even if the act is outside the business purpose of the company stated in its Articles of Association, unless the act exceeds the powers that the law confers on the company or allows to be conferred on the company. (4) Completion of the formalities of disclosure of the particulars concerning persons who are authorized to represent a company shall constitute a bar to any irregularity in their appointment being relied on by the company as against third parties, unless the company proves that the third parties had knowledge thereof.

Article 26 General Provisions Concerning Procura

(1) Procura is a form of power of attorney in which a company authorizes one or more named persons to conduct any kind of legal transaction, judicial or extra judicial, on behalf of the company. (2) If the procura does not state explicitly that it is issued for a particular branch of a company, it shall be deemed issued for the entire company. (3) Procuration shall not authorize the entering into of contracts involving the transfer or charging of immovables, unless such authorization was explicitly granted in the procura. (4) Duties which the law has imposed on directors of a company may not be delegated to a procurator. (5) Limitation of procuration has no legal effect as against third parties unless the company proves that the third party knew of the limitation or could not in view of evident circumstances have been unaware of it.

Article 27

Issuance and Types of Procura (1) Procuration may be issued by a company, to one person, to two or more persons separately, or to two or more persons jointly. (2) If procuration is issued to two or more persons separately, each procurator shall have all authority of the procuracy under this Law. (3) If procuration is issued to two or more person jointly, the legal validity of transactions shall be subjected to joint declaration of will. Declarations of third parties made to one of the procurators shall be deemed made to all procurators. (4) Procuration is not transferable. (5) Procura must be given in written form. (6) Procura may be given only to natural persons

Article 28 Procurator's Signature

A procurator shall sign a company under his name and surname, with an indication which clearly states his positions as a procura or by the mark "p.p.".

Article 29 Termination of Procuration

(1) Procuration may be revoked by a company at any time. (2) A provision of a contract under which a company waives of its right to revoke a procuration, as well as a provision under which a right on revoke of a proxy is bound to a term or a condition is null and void. (3) If procuration is revoked, the procurator may exercise towards the company those rights which stem from the legal relationship on the basis of which procuration was issued. (4) Procuration shall not be terminated by death or loss of capacity to act of a member or shareholder who issued the procuration.

Article 30

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Registration of Procura (1) The entrepreneur or the legal representative must report issuance or revocation of procuration in the Register. (2) When applying for registration, the procurator shall deposit his signature and a supplement indicating his function with the Registry

Title 7

Duties to a Company

Article 31

General Principles (1) When exercising their rights and performing their duties, general partners in a general or a limited partnership, directors, controlling members or shareholders in a limited liability company or a joint stock company, and representatives and liquidators in any company, are obligated to adequately take into consideration the interests of the company and of the other partners or members. Such persons are further defined in Articles 38 and 371 of this Law. (2) The obligation referred to in paragraph (1) of this Article includes the duties that are specifically described in Articles 32, 33, 36 and 37 of this Law. (3) Unless otherwise provided by this Law, a company’s Articles of Association or an agreement of the persons affected, partners, members and shareholders of a company have the same rights and duties under the same circumstances and shall be treated equally.

Article 32 Duty of Care and Business Judgment Rule

(1) A partner in a general partnership, a general partner in a limited partnership, a director in a limited liability company or a joint stock company, and a representative or liquidator of any company, has a duty to perform his functions in that capacity in good faith, in the reasonable belief that he is acting in the company’s best interests, and with the care of a good businessman. (2) In performing that duty a person may rely on information, opinions or reports issued by directors or employees of the company, independent legal counsel or auditors for the company, and other persons who he believes are reliable and competent to offer such information, opinions or reports. (3) A person who has acted as described in paragraphs (1) and (2) of this Article fulfils this duty, and will not be liable for damages for making a business judgment, if:

1) he does not have a personal interest (as defined in Article 34 of this Law) in the subject of the judgment; 2) he is fully informed on that subject to the extent appropriate under the circumstances; and 3) he honestly believes when the judgment is made that it is in the best interest of the company.

Article 33

Duty of Loyalty and Conflicts of Interest A partner in a general partnership, a general partner in a limited partnership, a director, controlling member or shareholder of a limited liability company or a joint stock company, and a representative or liquidator of any company, who has a personal interest in a matter affecting the company, has a duty to act fairly and loyally to the company regarding that matter. This includes but is not limited to a duty not to use property of the company for his own needs as though it was his property, not to use confidential information of the company for the purpose of gaining personal profit, not to abuse his position in the company for the purpose of personal enrichment to the damage of the company, not to take business opportunities of the company for himself, and otherwise to serve only the company’s interest in all acts or transactions in which he has a personal interest.

Article 34 Personal Interest in an Act or Transaction

(1) A person has a personal interest in an act or transaction if: 1) he or a family member is a party to the act or transaction or has a financial interest in the act or transaction;

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2) he has a financial or family member relationship with a party to the act or transaction, or with a person who has a financial interest in the act or transaction, that could reasonably be expected to affect his judgment adversely to the company; or 3) he is under the controlling influence of a party to the act or transaction, or of a person who has a financial interest in the act or transaction, that could reasonably be expected to affect his judgment adversely to the company.

(2) A “family member” of a person includes: 1) the person’s spouse, or a parent, brother or sister of the person’s spouse;

2) the person's parent, child, grandchild, brother or sister, or a spouse of any of the foregoing; and 3) an individual having the same home as the person.

Article 35 Action and Remedies Regarding Conflict of Interest Transactions

(1) A person who enters into a contract or transaction with the company has not violated Article 33 of this Law, and will not be liable for damages arising from his conflict of interest, if the contract or transaction is authorized in good faith by either:

1) all partners who do not have a personal interest (in the case of a general partnership or a limited partnership), unless the Articles of Association or partnership agreement provides for such authorization to be given by a lesser vote but not less than a majority; 2) a majority vote of the members or shareholders who do not have a personal interest given at a members' or shareholders' meeting (in the case of a limited liability company or joint stock company); or 3) a majority of the members of the board of directors who do not have a personal interest in the case of a joint stock company; provided that all material facts regarding the personal interest have been disclosed or are known to such authorizing persons.

(2) The person who enters into a contract or transaction with the company has not violated Article 33 of this Law, and will not be liable for damages arising from his conflict of interest, if he proves that the contract or transaction was fair to the company when it was made or entered into. (3) Any authorization, contract or transaction referred to in paragraph (1), point 3) of this Article shall be reported to the first shareholders' assembly next following. (4) A contract or transaction which violates Article 33 of this Law shall be voidable at the option of the company. Alternatively, a company may assert and the competent court shall have power to order other remedies including remedies of the kind referred to in paragraph (3) of Article 36 of this Law.

Article 36

Duty Not to Compete With the Company (1) A general partner in a general partnership, a general partner in a limited partnership, a director, controlling member or shareholder of a limited liability company or a joint stock company, or a representative or liquidator of any company, may not directly or indirectly engage in business competition with the company unless the competition is authorized by majority vote of persons referred to in paragraph (1) of Article 35 in accordance with the standards of Article 35. Such competition shall be deemed to include but not be limited to being employed in, or being a general partner, director, or controlling member or shareholder in another company pursuing the same or a competing business or an entrepreneur engaging in such. (2) A company’s Articles of Association may provide that the prohibition referred to in paragraph (1) of this Article shall remain in force after the loss of the status referred to in that paragraph, but for no longer than two years. (3) If a person referred to in paragraph (1) is in breach of this Article the company may seek damages and, without limiting its right to damages, may assert the right to:

1) accept transactions made by such person on its own account as being transactions made on account of the company; 2) transfer to the company any benefits resulting from transactions made on such person’s account; or

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3) transfer to the company any claims stemming from the transactions made on such person’s account.

(4) Claims to enforce the rights of the company must be brought within three years after the date of the realization of the infringement. Paragraph (8) of Article 13 applies accordingly.

Article 37

Duty to Keep Business Secrets (1) Information on operations which would obviously result in significant damage to a company if known by a third party without the consent of a company are considered to be business secrets. (2) Information which is required to be disclosed by law or relates to violation of laws, good business practices and principles of business ethics, will not be regarded as business secrets. Disclosure may be legitimate if it is intended to protect prior public interests. (3) Any person referred to in Articles 31 and 38 shall be liable for damages caused to the company by his unlawful disclosure of business secrets.

Article 38 Persons Owing Duties

The persons referred to in Article 31 and analogous paragraphs of Articles 32-37 shall include: 1) a member of the board of directors, management body, supervisory board, audit committee or an internal auditor of a limited liability company or joint stock company; 2) a person who has authority to represent a company as referred to in Article 25 of this Law; 3) a person who has contractual authority to manage the business of a company (contract on management) or similar authority or power over the management of another company; and 4) a controlling member or shareholder of a limited liability or joint stock company as defined in Article 369 of this Law.

Article 39

Increase or Decrease of Duties by a Company (1) A company may increase any of the duties stated in Articles 31-33, 36 or 37, and may increase but not decrease the vote or other requirements for approval of conflict of interest transactions under Article 35, by a provision in its Articles of Association, company agreement or by-laws. (2) A company may not decrease the duties stated in Articles 31-33, 36 or 37, except that a general partnership, a limited partnership, a limited liability company or a closed joint stock company may identify specific types of activities that do not violate the duty not to compete stated in Article 36. Any such provision shall be stated in its Articles of Association, company agreement or by-laws and must be approved by unanimous vote of the partners, members of shareholders unless the Articles of Association, company agreement or by-laws provide for a lower vote but not less than a majority. (3) An open joint stock company may not take the action referred to in paragraph (2) of this Article.

Title 8

Court Action to Enforce Duties

Article 40 Direct Court Action by a Partner, Member or Shareholder

(1) A partner, member or shareholder of a company has the right to file a complaint in court in his own name against any person referred to in paragraph (1) of Article 31 and Article 38, to enforce or recover damages caused by violation of duties under this Law. (2) In the case of a general partnership, duties which are owed to the company shall be considered owed to the partners directly, unless the partnership’s Articles of Association or partnership agreement provides otherwise. (3) A complaint under this Article may be brought by one person in his own name or by two or more persons in their names acting together.

Article 41 Derivative Court Action by a Limited Partner, Member or Shareholder

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(1) A limited partner in a limited partnership, member in a limited liability company, or shareholder in a joint stock company has the right to file a complaint in court in his name and on the company’s behalf against any person referred to in paragraph (1) of Article 38, to enforce or to recover damages to the company caused by violation of duties owed to the company including but not limited to those stated in Articles 31-33, 36 and 37 of this Law. (2) No such complaint may be brought unless the limited partner, member or shareholder had that status at the time of the acts complained of, or acquired that status as a result of a transfer from a person who had that status at that time. (3) No such complaint may be brought unless the limited partner, member or shareholder holds such interests or shares in the company representing at least 5% of the company’s basic capital. If two or more persons bring the action together the holdings of all of them shall be counted for this purpose. (4) No such complaint may be brought unless the limited partner, member or shareholder has previously requested the company in writing to bring the complaint and that request was refused or not responded to by the company within 30 days, or unless such a request is not likely to succeed. In a limited partnership this request shall be made to all general partners; in a limited liability company the request shall be made to all directors or other persons who have authority to bring the complaint; and in a joint stock company the request shall be made to the board of directors. (5) A complaint under this Article must include a copy of the request and details of all other efforts to have the company itself bring the complaint, or state in detail why the request would not succeed. (6) A complaint under this Article may not be discontinued or settled between the plaintiff and the defendant without the court’s approval given after full disclosure of the details of the proposed discontinuance or settlement. (7) All damages received in a derivative case shall be the property of the company, except that the plaintiffs who prevailed shall be entitled to recover their reasonable expenses including legal fees from the defendants. Such amount shall be approved by the court. (8) The provisions of this Article shall not be applicable to a general partnership unless its Articles of Association or partnership agreement so provides.

Article 42 Simultaneous Direct and Derivative Actions

If an action complained of gives rise to both direct and derivative complaints, the person complaining may maintain both court cases simultaneously, and the special restrictions including rules on settlement and dismissal in Article 41 shall not apply to the direct case.

Article 43 Actions in Certain Companies

(1) In the case of a limited partnership, limited liability company or closed joint stock company, the competent court may order that a derivative complaint will be treated as a direct complaint and exempt it from the restrictions stated in Article 41 and order an individual recovery of damages. (2) The court may order this as described in paragraph (1) if it finds that to do so will not expose the company or the defendant unfairly to a large number of cases.

Title 9

Right to Information

Article 44 Right to Information and Access

(1) Every company shall keep its partners, members or shareholders informed generally regarding the company’s performance and financial condition and shall make available, at their request, the information and documents required to be made available in the Articles of this Law relating to specific forms of companies. (2) A company’s Articles of Association, company agreement or by-laws may not reduce or eliminate the rights referred to in this Article.

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(3) If a company fails to provide a partner, member or shareholder of a company with information requested in writing under this Article, the member may request the competent court to order the information to be produced.

Article 45

Submission of Public Offering to Registry and to Publication (1) A company which offers securities by public offering shall submit to the Registry, for publishing, all information contained in the offering documents that is required by the Law on Securities Markets to be submitted and published. (2) Such a company shall also publish the information referred to in paragraph (1) of this Article in the mass media in accordance with the Law on Securities Markets.

Article 46 Disqualification of Certain Persons

(1) A person who has been convicted of criminal offenses related to performance of his duties under a special law relating to the economy or business, may not be a director, representative, procurator or liquidator of a company until the legal consequences thereof have lapsed under the law. (2) A member of a supervisory board of a company, and a person who is related to such person as described in Article 34 of this Law, may not be a representative of management body member of such company or a linked company.

Article 47

Matters Concerning Courts (1) The commercial court in the territory where a company’s registered office is located is competent to decide disputes among founders, partners, members and shareholders with respect to their rights and obligations. The same court is competent to decide any disputes arising under this Law. (2) The court shall decide in non-contentious proceedings in matters arising under Article 14, paragraphs (2) and (3); Article 44, paragraph (3); Article 137, paragraphs (3) and (4); Article 153, paragraph (3); Article 170; Article 173; Article 196, paragraph (4); Article 198, paragraph (3); Article 216; Article 257, paragraph (4) Article 281; Article 287, paragraph (3); Article 292, paragraph (4); Article 309, paragraph (3); Article 337, paragraph (2); Article 338, paragraph (2); Article 339, paragraph (5); Article 347, paragraphs (1) and (2); Article 356, paragraph (3); Article 357; Article 364, paragraph (1); Article 365, paragraph (7); and Article 386, paragraph (1). (3) In matters referred to in provision in paragraph (2) hereof, an emergency procedure must be available and a court of first instance is obliged to decide within 60 days the latest. An appeal may be submitted within eight days. A court of second instance is obligated to make a decision in respect of the appeal within thirty days at the latest. (4) An appeal of a court decision in respect of matters arising under paragraph (2) of this Article shall not stay execution of the decision.

Article 48 Prescription

(1) Partners, members and shareholders of a company must bring a claim against the company based on that status not later than 180 days after the date of becoming aware of the basis for the claim but not in any event later than three years from the date of the maturity of the claim, unless otherwise provided by law for particular claims. (2) Claims of a company’s creditors as against partners, members and shareholders must be brought not later than 180 days after the date of becoming aware of the basis for the claim but not in any event later than three years from the date of dissolution of the company or from the date of termination of their status as partners, members or shareholders, unless otherwise provided by law for particular claims. (3) The provisions of paragraphs (1) and (2) of this Article shall also apply to a company's claims against partners, members, shareholders, members of company bodies representatives and liquidators in such capacity.

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PART TWO

PROVISIONS SPECIFIC FOR EACH FORM OF COMPANY

Chapter 2

GENERAL PARTNERSHIP

Title 1

General Provisions Concerning General Partnerships

Article 49 Definition and Liability Principles

(1) A general partnership is a company organized by two or more persons, as general partners of the company, who undertake to conduct business under a common name under this Chapter and this Law. As used in this Chapter the term”company” shall mean a a general partnership unless the context requires otherwise. (2) A general partnership is liable for all of its obligations with all of its assets. (3) All partners of a general partnership are personally, jointly and severally liable for all obligations of the partnership with all of their assets, unless otherwise agreed by a third party who has a claim. Agreements among partners to the contrary are ineffective as against third parties.

Article 50

Freedom to Contract Principle The partners of a general partnership may regulate freely their relations among themselves and

with the partnership except as otherwise provided by this Law and other laws.

Article 51 Articles of Association..

(1) The Articles of Association of a general partnership must contain: 1) the full name and place of residence of all natural-person partners and the registered name and registered office of all legal entity partners; 2) the registered name and registered office of the partnership; 3) the business purpose of the partnership; 4) a statement of the kind and value of the contribution of each partner; and 5) the duration of the partnership, unless it is perpetual.

(2) The Articles of Association may contain other matters relating to the partnership and the partners. (3) The Articles of Association may be amended only with the agreement of all partners, unless otherwise provided by the Articles of Association.

Article 52

Partnership Agreement (1) Apart from the Articles of Association a partnership may have a partnership agreement regulating the partnership’s business and governance. (2) A partnership agreement is not required to be submitted to the Registry. (3) A partnership agreement must be in writing and must be signed by every partner. (4) A partnership agreement and any amendments thereto shall have legal effect among partners as of the moment of signing of the agreement by all partners unless provided otherwise in the partnership agreement.

Article 53 Relationship of Articles of Association and Partnership Agreement

In the event of any inconsistency between a partnership’s Articles of Association and partnership agreement, the Articles of Association shall control.

Article 54

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Default Provisions of This Chapter (1) When used in this Chapter the term “default provision” means a provision of this Chapter which contains, or is expressly made subject to, the words “unless provided otherwise in a partnership’s Articles of Association or partnership agreement” or words with that same meaning. (2) The default provisions shall be applicable to a partnership unless, and except to the extent that, the partnership’s Articles of Association or partnership agreement provides otherwise.

Title 2

Legal Relations Between Partners and With the Partnership

Article 55

Articles of Association and Partnership Agreement May Govern (1) Legal relations of partners among themselves and with the partnership shall be governed by the partnership’s Articles of Association and partnership agreement if it has a partnership agreement. (2) Articles 56-68 of this Law shall apply to a partnership unless the partnership’s Articles of Association or partnership agreement provides otherwise.

Article 56

Contributions (1) The contribution of a partner to a partnership may be in money or in kind. Contributions in labor or services, past or future, are permitted. (2) All partners’ contributions shall be equal in value.

Article 57 Delay in Payment of Contribution

(1) A partner who: 1) fails to pay his contribution when due in cash or in kind as required by the Articles of Association, 2) fails to timely transfer to the partnership any amount of cash or other property he has received at any time on behalf of the partnership, or 3) takes for himself cash or other property from the partnership without authorization, shall pay interest on the amount from the day on which his contribution or the transfer were due or from the day on which he took the cash or other property.

(2) The provisions of paragraph (1) of this Article shall not limit any other remedies available to a partnership.

Article 58

Increase or Reduction of Contribution (1) No partner is obligated to increase his contribution above the amount agreed in the Articles of Association. (2) No partner is obligated to supplement his contribution if it is decreased by losses of the partnership. (3) No partner may reduce his contribution without the approval of all the other partners.

Article 59

Right to Reimbursement for Expenses

A partner shall be entitled to reimbursement of expenses from the partnership which he has incurred in conducting the partnership's business and which were reasonably necessary in view of the circumstances.

Article 60

Transfer of Interests Among Partners Transfer of interests among partners shall be unrestricted.

Article 61

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Decision Making by Partners (1) A decision in the ordinary course of a partnership’s business shall be made by a majority of the total number of partners. The consent of all partners shall be required for a decision on a matter outside the ordinary course of the partnership’s business and for admission of a new partner. (2) In the case of decisions which must be adopted by all partners, the consent of all those who do not have a conflict of interest with the partnership in the decision is required. (3) Partners shall make decisions for the partnership during a meeting of partners. The same applies as to managing directors.

Article 62 Management of a Partnership

(1) All partners shall have the right to manage the business of the partnership as managing directors. (2) If the Articles of Association or partnership agreement of a partnership has assigned management authority to one or more particular partners, the other partners shall be excluded from management.

Article 63 Management by More than One Partner

(1) If two or more partners are vested with management authority, each of them shall have the right to act independently, unless one of them contests such right. (2) If the Articles of Association or partnership agreement provides that managing directors may act only jointly, the approval of all managing directors shall be required for each act or transaction, except when this would require deferment of a decision and the deferment would harm the partnership’s interests. (3) If the Articles of Association or partnership agreement provides that a managing director is bound to follow instructions of another managing director and the first managing director considers instructions given to be inappropriate, he shall notify the other managing directors for the purpose of deciding jointly on the transaction, unless this would require deferment of a decision and the deferment would harm the partnership’s interests.

Article 64

Scope of Management Authority (1) The management authority shall apply to all matters in the ordinary course of the partnership’s business. (2) Management authority as to matters which are outside the regular conduct of the partnership’s business shall require consent of all partners.

Article 65 Transfer of Management Authority

(1) No partner may transfer his management authority to a third party unless all other partners approve. (2) A partner who transfers his management authority to a person who is not a partner is liable for the choice of that person and for the acts of that person in exercising those management rights.

Article 66

Resignation of Management Authority (1) A managing director may resign on reasonable grounds. He may not surrender that right in advance. (2) A managing director must give notice of such resignation in writing to all the partners and the partnership in time to allow for continuation of pending transactions by other managing directors, unless there are reasonable grounds for shorter notice. (3) If a managing director resigns without reasonable grounds, he is obligated to compensate any damage to the partnership caused thereby.

Article 67 Revocation of Management Authority

The management authority of a partner may be revoked by decision of a competent court upon request of the other partners made on reasonable grounds which may include incapacity to perform managerial duties regularly or gross violation of duties.

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Article 68 Sharing of Profit and Loss

(1) At the end of each business year an annual statement of account for the partnership shall be prepared stating profits or losses of the partnership and each partner’s share thereof. (2) Each partner shall be entitled to an equal share of any profits of the partnership. (3) Each partner shall bear equally any losses of the partnership. (4) The interest of each partner in the profit of the partnership shall be paid to him not later than three months from the date of the adoption of the financial statement. (5) If the Articles of Association contains a provision which differs from the provisions of paragraphs (2) and (3) of this Article such provision shall, in case of ambiguity, be considered to relate both to profits and losses.

Title 3

Legal Relations of Partnership and Partners to Third Parties

Article 69

Representation of a Partnership (1) Each partner shall have authority to represent and bind the partnership, unless the Articles of Association or partnership agreement provides otherwise. (2) If two or more partners have authority to represent and bind a partnership, they may do so independently unless the Articles of Association or partnership agreement provides otherwise. The Articles of Association or partnership agreement may determine that all or some of the partners may represent the company only jointly. Partners who are entitled to represent the company jointly may authorize one or more of them to carry out specific transactions or specific kinds of transactions. If any written resolution is required for this it may be delivered to any one of the partners entitled to participate in the representation of the partnership, and such delivery will constitute delivery to the partnership. (3) The Articles of Association or partnership agreementmay determine that the partners may represent the partnership only jointly with a procurator. In this case, sentences 3 and 4 of paragraph (2) of this Article shall apply accordingly. (4) The exclusion of a partner from authority to represent the partnership, a decision on joint representation, a decision of the kind described in paragraph (3) of this Article, and as any change in a partner’s authority to represent the partnership shall be reported for entry in the Registry by the partnership.

Article 70 Resignation of Representation Authority

(1) A partner authorized to represent a partnership may resign on reasonable grounds. He may not surrender such right in advance. (2) A resigning partner must give notice of his resignation in writing to all the partners and the partnership in time to allow for continuation of pending transactions by other representing partners, unless there are reasonable grounds for shorter notice. (3) If a representing partner resigns without reasonable grounds, he is obligated to compensate any damage to the partnership caused thereby.

Article 71 Revocation of Represention Authority

Authority to represent a partnership may be revoked by decision of a competent court upon request made by the other partners on reasonable grounds which may include incapacity to perform his regular duties as a representative or gross violation of his duties.

Article 72

Liability Defenses Available to a Partner If a third party files a claim against a partner with respect to an obligation of the partnership, that

partner may use defenses available to him personally as well as defenses available to the partnership.

Article 73

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Setoff of Claims (1) The claim of a third party against a partner may be recovered from claims of the partner against the partnership. (2) A partnership is not liable for claims made against a partner by reason of the fact that he is a partner. (3) A partner is not personally liable for claims of the partnership or other partners against his creditors.

Article 74

Liability of a New Partner A person who becomes a partner in an existing general partnership assumes the liabilities of the partnership, including pre-existing liabilities, equally with all existing partners. Agreements to the contrary are ineffective as against third parties unless the third parties agree.

Title 4

Partnership Interests

Article 75 Transfer of Partnership Interests to Third Parties

(1) A partner may transfer his interest in a partnership to a third party only with the consent of all the other partners. (2) In case of a proposed transfer of interest to a third party, the other partners shall have a preemptive right to purchase that interest. (3) If the other partners do not give such consent and do not exercise such preemptive right, the partner who wishes to transfer his interest may do so freely to any third party. (4) A pledge of an interest shall be considered a transfer of the interest for the purposes of paragraphs (1), (2) and (3) of this Article. Transfer of an interest at death to heirs and legal successors shall not be a transfer of interest to a third party for the such purposes. (5) The Articles of Association or partnership agreement may contain provisions regarding transfer which are different from those in paragraphs (1)-(4) of this Article. paragraphs (1)-(4) shall not apply if and to the extent that the Articles of Association or partnership agreement provides otherwise.

Article 76 Liability Relating to Transfer

(1) In case of any transfer of interest, the transferor and the transferee shall be jointly and severally liable to the partnership for all of the transferor’s obligations to the partnership at the time of the transfer, unless all of the partners agree otherwise. (2) A claim by or on behalf of a partnership with respect to paragraph (1) of this Article must be brought within three years after from the registration of the transfer of interest. (3) Paragraph (2) of this Article shall also apply accordingly to all other claims by or on behalf of a partnership against a person who has ceased to be a partner.

Title 5

Dissolution of a General Partnership and Exit of Partners

Article 77 Events Causing Dissolution of a Partnership

(1) A general partnership shall dissolve upon occurrence of any of the following events: 1) expiration of the term or completion of the task for which the partnership was established; 2) a decision of the partners to dissolve; 3) opening of a bankruptcy procedure against the partnership; 4) the date as of which the partnership has not carried out any business activities for two years in continuous succession; 5) any event agreed to in the Articles of Association or partnership agreement that results in dissolution; or 6) a court decision that the partnership is dissolved.

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(2) A partner shall cease to be a partner upon the occurrence of any of the following events unless the Articles of Association or partnership agreement provides otherwise:

1) death of the partner; 2) opening of a bankruptcy proceeding against the partner; 3) notice of withdrawal as a partner given by the partner; 4) a decision of the partners made in accordance with the Articles of Association or the partnership agreement and this Law; 5) Any other cases stated in the Articles of Association or partnership agreement as causing the partner to cease to be a partner.

(3) The partner shall cease to be a partner upon the occurrence of the event referred to in paragraph (2) of this Article occurs unless, in the case of points 3) or 4), the notice referred to in 3) or the decision referred to in 4) provides otherwise.

Article 78

Tacit Extension of Duration If a partnership has been established for a definite term or for the fulfilment of a specific purpose

and continues operating after the expiration of that term or the achievement of that purpose, the partnership shall be considered to have received the tacit consent of all partners to exist for an indefinite period of time.

Article 79 Withdrawal of a Partner by Giving Notice

(1) A partner may withdraw voluntarily from a partnership by giving notice of his withdrawal to the partnership. A partner may thus withdraw only by giving written notice of withdrawal to the other partners not less than six months before the end of the partnership’s business year, unless the Articles of Association or partnership agreement provides otherwise. (2) A partner’s right referred to in paragraph (1) of this Article may not be reduced or restricted.

Article 80 Dissolution of a Partnership by Court Decision

(1) Pursuant to a complaint filed by a partner, a partnership may be dissolved by court decision for important reasons. (2) An important reason under paragraph (1) of this Article shall exist if the court finds that another partner has failed deliberately or by gross negligence to perform duties necessary for the partnership’s business under the Articles of Association, the partnership agreement or this Law or if the performance of such duties has become impossible, or that it is not otherwise possible to continue the partnership’s business in conformity with the Articles of Association, the partnership agreement or this Law. (3) Any reduction or elimination a partner’s right to file a complaint referred to in paragraph (1) of this Article shall be null and void. (4) A claim under this Article shall be brought against the partnership and all other partners in the competent court. (5) In a case referred to in this Article the court may, instead of ordering dissolution of the partnership, order the expulsion of a partner under Article 81 of this Law.

Article 81

Expulsion of a Partner The provisions of Articles 177 and 178 relating to expulsion of a member of a limited liability

company shall apply mutatis mutandis with respect to expulsion of a partner of a partnership.

Article 82 Settlement of Accounts on Exit of a Partner

(1) The interest of a partner who exits the partnership shall be distributed among the remaining partners equally. (2) The remaining partners shall be obligated to pay the departing partner the amount he would have received if the partnership had been dissolved at the time of his exit without taking account of then-outstanding transactions.

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(3) If the value of the assets of the partnership is not sufficient to cover the partnership's commitments, the exiting partner shall accept a part of the missing amount proportionate to his share in bearing losses of the partnership. (4) Paragraph (1)-(3) of this Article shall apply unless otherwise provided by the Articles of Association or partnership agreement.

Article 83 Treatment of Outstanding Transactions on Exit of a Partner

The share of a partner leaving a partnership in profits and losses of pending transactions shall be valued as of the date of his exit, unless the Articles of Association or partnership agreement provides otherwise.

Article 84 Procedure in Case of One Remaining Partner

(1) If for any reason only one partner remains, he shall either take all necessary measures to adapt the company within three months after the date that he became the only partner to the requirements of this law, or continue the business as an entrepreneur. (2) If within the time limit referred to in paragraph (1) of this Article a partner fails to register the change with the Registry, the partnership shall be liquidated.

Article 85 Continuation of Partnership with Heirs

(1) A general partnership shall continue with the heirs to a deceased partner, if so provided by the -Articles of -Association and accepted by the heirs. (2) The heirs may exercise the right referred to in paragraph (1) of this Article within 30 days from the date they knew of the succession or within 30 days from the appointment of the representative of an heir who has no legal capacity, as the case may be.

Article 86 Entry into the Registry

(1) The partners with authority to represent a partnership shall report a dissolution and the exit of any partner from the partnership to the Registry for registration and publication. (2) In case of dissolution by court decision, the court shall register the dissolution ex officio.

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Chapter 3

LIMITED PARTNERSHIP

Title 1

General Provisions Concerning Limited Partnerships


(1) A limited partnership is a partnership organized by two or more persons who undertake to conduct business under a common name under this Chapter and this Law and in which at least one partner’s liability is limited to the loss of his agreed contribution (a limited partner), and at least one partner’s liability is unlimited (a general partner). As used in this Chapter the term “company” shall mean a limited partnership unless the context requires otherwise. (2) A limited partnership is liable for all of its obligations with all of its assets. (3) The liability of a limited partner and a general partner for the obligations of the partnership shall be as stated in paragraph (1) of this Article.

Article 88

Application of General Partnership Provisions to Limited Partnerships (1) Unless this Chapter of the Law provides otherwise, the provisions of Chapter 2 on general partnerships shall also apply, mutatis mutandis, to limited partnerships. (2) A general partner in a limited partnership has the same status as a partner in a general partnership unless otherwise provided by this Law.

Article 89 Articles of Association and Partnership Agreement

(1) The Articles of Association of a limited partnership must contain: 1) the full name and place of residence of each natural-person partner and the registered name and registered office of each legal-entity partner and a statement of which type of partner each is; 2) the registered name and registered office of the partnership; 3) the business purpose of the partnership; 4) a statement of the kind and value of the contribution of each partner; and 5) the duration of the partnership, unless it is perpetual.

(2) The Articles of Association may contain other matters as desired by the partners.

Article 90 Amendment of Articles of Association

(1) The Articles of Association of a limited partnership may be amended only with the agreement of all partners, unless the Articles of Association provide otherwise. (2) An amendment which increases the obligations of a particular partner shall require the consent of that partner.

Article 91 Limited Partnership Agreement

(1) Apart from the Articles of Association a partnership may have a limited partnership agreement regulating the partnership’s business and governance. (2) A limited partnership agreement is not required to be submitted to the Registry. (3) A limited partnership agreement must be in writing and must be signed by every partner. (4) A partnership agreement and any amendments thereto shall have legal effect among partners as of the moment of signing of the agreement by all partners unless provided otherwise in the partnership agreement.

Article 92 Relationship of Articles of Association and Partnership Agreement

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In the event of any inconsistency between a limited partnership’s Articles of Association and limited partnership agreement, the Articles of Association shall control.

Title 2

Legal Relations Between Partners

Article 93

Applicable Provisions Articles 94-97 of this Law shall apply to a limited partnership unless provided otherwise by the

limited partnership’s Articles of Association or partnership agreement.

Article 94 Contributions

(1) The contribution of a general partner or a limited partner to a limited partnership may be in money or in kind, including labor or services already performed for the partnership but not future labor or services. (2) A general partner or a limited partner must pay in all of his contributions in kind to the limited partnership prior to his becoming a limited partner, unless provided otherwise in the Articles of Association or partnership agreement.

Article 95

Transfer of Interests (1) A general partner of a limited partnership may not voluntarily transfer all or any part of his partnership interest without the consent of all partners, unless the Articles of Association or partnership agreement provides otherwise. (2) A limited partner of a limited partnership may freely transfer all or any part of his partnership interest by sale, gift, pledge, inheritance or otherwise, unless the Articles of Association or partnership agreement provides otherwise.

Article 96 Management; Limited Partner May Not Manage

(1) One or more general partners shall manage the business of the limited partnership as its managing directors. (2) A limited partner may not participate in management of the partnership.

Article 97 Sharing of Profit and Loss

Unless provided otherwise in a limited partnership’s Articles of Association or partnership agreement, each general and limited partner shall be entitled to distributions from the partnership in proportion to his percentage share of the contributions of all partners actually paid in.

Title 3

Relations Between Partners and Third Parties

Article 98 Representation; Limited Partner May Not Represent

A limited partner may not represent the limited partnership in dealings with third parties.

Article 99 Liability of a Limited Partner as a General Partner in Certain Cases

(1) A limited partner shall be liable as a general partner if his name is included in the registered name of the limited partnership with his consent. (2) A limited partner shall be liable as a general partner if he acts contrary to paragraph (2) of Article 96.

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Title 4

Changes in Membership and Status of a Company

Article 100 Termination of Partner Status and Transformation of Legal Form

(1) A limited partnership shall not dissolve upon the death of a limited partner or dissolution of one or more limited partners. (2) If a limited partnership has no general partners and new general partners are not admitted within three months after the date on which such event occurs,, the limited partnership shall dissolved. The foregoing shall not limit the right of the remaining limited partners to reorganize the limited partnership as a limited liability company or joint-stock company. (3) If all limited partners withdraw from a limited partnership, the company may continue as a general partnership or as the business of an entrepreneur in accordance with paragraph (2) of this Article. (4) Any events referred to in paragraphs (1)-(3) of this Article must be reported to the Registry and published.

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Chapter 4

LIMITED LIABILITY COMPANY

Title 1

General Provisions Concerning Limited Liability Companies


(1) A limited liability company is a company organized by one or more persons, as members of the company, to conduct business under a common name under this Chapter and this Law. As used in this Chapter the term “company” shall mean a limited liability company unless the context requires otherwise. (2) A limited liability company is liable for all of its obligations with all of its assets. (3) A member of a limited liability company is not liable for obligations of the company solely by reason of being a member, except that a member shall be liable up to the amount of any contracted but unpaid capital contribution as provided in Article 13 and paragraph (3) of Article 108 of this Law.

Article 102 Freedom to Contract Principle

The members of a limited liability company may regulate freely their relations among themselves and with the company except as provided in this Law and other laws.

Article 103 Articles of Association

(1) The Articles of Association of a limited liability company must contain: 1) the full name and place of residence of each natural person member and the registered name and

registered office of each legal entity member; 2) the registered name and registered office of the company; 3) the business purpose of the company; 4) the amount of the company’s initial basic capital, the amount of each initial member’s

contribution, and a description of the nature and valuation of any such contributions which are in kind;

5) the manner and time of making contributions in cash and kind; 6) the total amount, or at least an estimate, of all the costs payable by the company or chargeable to it

by reason of its formation and, where appropriate, before the company is authorized to commence business; and

7) any special advantage granted, at the time the company is formed or up to the time it receives authorization to commence business, to anyone who has taken part in the formation of the company or in transactions leading to the grant of such authorization.

(2) The Articles of Association may also contain other provisions including any provision that may be contained in a company agreement.

Article 104 Company Agreement

(1) Apart from the Articles of Association a limited liability company may have a company agreement regulating the company’s business and governance. By way of example and not limitation, a company agreement may contain provisions which:

1) impose obligations on members to make contributions to the company in addition to their initial contributions, and prescribe specific penalties or other consequences for their failure to meet such obligations; 2) permit or restrict transfer of shares by members in ways different from or in addition to those stated in Articles 123 or 124, or eliminate restrictions on transfers of shares by members; 3) state that members’ votes or entitlement to dividends will be equal or will be according to capital contributions, or will be according to some other agreed method; or

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4) prescribe detailed procedures for decision-making including a method for settling disputes in case of deadlock among members.

(2) A company agreement is not required to be submitted to the Registry. (3) A company agreement must be in writing and must be signed by every member of the company. (4) A company agreement and any amendments thereto shall have legal effect among members as of the time of the signing of the agreement by all members, unless provided otherwise in the company agreement.

Article 105 Relationship of Articles of Association and Company Agreement

In the event of any inconsistency between a company’s Articles of Association and company agreement, the Articles of Association shall control.

Article 106 Default Provisions of This Chapter

(1) When used in this Chapter the term “default provision” means a provision of this Chapter which contains, or is expressly made subject to, the words “unless otherwise provided in a company’s Articles of Association or company agreement” or words with that same meaning. (2) The default provisions shall be applicable to a company unless, and except to the extent that, the company’s Articles of Association or company agreement provides otherwise.

Title 3

Costs

Article 107 Founding Costs

(1) The Articles of Association of a company may provide that the cost of founding a company shall be borne by the company or by its founders. (2) If not provided otherwise in the Articles of Association, the founders shall bear the cost of founding the company. (3) If the Articles of Association provides that the cost of founding shall be borne by the company, the cost shall be reimbursed by the company to the founders up to the amount stated in the Articles of Association. (4) If the Articles of Association state that such company shall bear such costs, the costs may be paid or reimbursed from the company’s basic capital or may be allocated to basic capital which represents shares of the founders.

Title 4

Members' Basic Obligations

Section 1

Obligation Concerning Contributions

Article 108 Nature of Contributions

(1) A member’s contribution to a limited liability company may be made in money or in kind including past, but not future, labor or services performed for the company. (2) Contributions of members need not be equal in value. (3) Contributions shall be paid in to a company as provided in the company’s Articles of Association or company agreement.

Section 2

Obligations Concerning Additional Contributions

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Article 109 Calls for Additional Contributions

(1) A company’s Articles of Association or company agreement may provide that the members may call for contributions from all members in addition to the contributions they have already made or are already obligated to make. (2) Unless provided otherwise in the Articles of Association or company agreement, such a call may be made only by unanimous consent of all members. (3) Unless provided otherwise in the Articles or Association or company agreement, such additional contributions shall be made by the members in proportion to their respective percentage shares of the total amount of all contributions then actually paid in. (4) A Company’s Articles of Association or company agreement may provide that if a member’s agreed initial contribution or additional contribution is unpaid and cannot be collected, the remaining members shall be obligated to pay such uncollected amount in proportion to their shares.

Title 5

Initial Capital

Article 110 Minimum Initial Capital .

The monetary value of the initial capital contributed by each member may not be less than 10 EUR in the dinar countervalue calculated per mean exchange rate.

Article 111 Increase of Capital

A company’s initial capital may be increased by decision of its members, and an increase may be by additional contributions by members or by conversion of any reserves available for that purpose.

Article 112

Decrease of Capital (1) A company’s capital may be decreased by decision of the members. (2) A decrease of capital may be made simultaneously with an increase of capital.

Title 6

Shares

Article 113

One Share Per Member (1) A member of a company shall have one single share in the company. (2) If a member acquires one or more additional shares, they will be combined with his existing share and all will constitute a single share.

Article 114 Voting and Distribution Rights of Shares

(1) Shares need not be equal in voting power or rights to distributions. (2) Unless provided otherwise in a company’s Articles of Association or company agreement, the members’ voting power in decisions of the company and the members’ rights to distributions from the company (including distributions of dividends and distributions on liquidation of the company) shall be in proportion to their then-current percentages of the total contributions of all members paid in.

Article 115 Certain Other Characteristics of Shares

(1) Shares in a limited liability company are not securities subject to the Law on Securities. (2) Shares in a limited liability company may not be offered through public invitation.

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(3) Unless otherwise provided in a company’s Articles of Association or company agreement, a limited liability company shall issue a certificate to each member identifying the member by name and evidencing his ownership of the share.

Article 116 Co-Ownership of a Share

(1) A share may have more than one owner. Co-owners of a share shall be considered to be one single member of the company but each of the owners shall provide the company with his own full name and address to be kept in the company’s book of shares. (2) Unless otherwise provided in a company’s Articles of Association or company agreement, co-owners of a share shall exercise their voting and other rights in the company only through a single joint representative. In every such case the co-owners must identify that representative to the company to be kept in the company’s book of shares. (3) Any notice given by the company to such a designated representative shall be deemed given to all of the co-owners. If the co-owners of a share fail to appoint and identify to the company such a representative, a notice given by the company to any co-owner shall be deemed given to all co-owners. (4) Co-owners of a share shall be jointly and severally liable to the company for all obligations to the company respecting the share. (5) Legal action by a company against one co-owner for such obligations shall have binding effect against all co-owners.

Article 117 Book of Shares

(1) A limited liability company must keep at its registered office at all times a book of shares which must contain: the personal name or registered name, the place of residence or registered office. and the tax reference number of every company member, every co-owner of a share, and every representative of co-owners of a share; the amount of all contracted and paid-in contributions of each member; any secondary obligations and additional contributions beyond the initial contributions; all pledges of shares; the number of votes or the percentage voting power of each share; all transfers of shares including the date and the name of the transferor and the transferee; and all changes in any of the foregoing. (2) Each limited liability company shall inform the Registry of the foregoing including changes thereto in accordance with the Law on Registration. (3) Any member of the company shall have the right to examine and make a copy of the book of shares during the company’s normal working hours. (4) The directors of a company shall maintain the book of shares and shall be responsible for its correctness.

Article 118

Registration of Shares (1) In relation to a limited liability company, a company member is a person who is registered as such in the company’s book of shares, whereas in relation to third parties a company member is a person registered as such in the Register. (2) The date on which a company has received an application for registration shall be considered to be the date of a member’s registration in the book of shares if all the information required for such registration has been provided, regardless of actual time of registration.

Article 119 A Company’s Acquisition of its Own Shares

(1) A company may not subscribe to its own shares directly or indirectly through third parties who would acquire them on its behalf. (2) A company may acquire its own shares from members, including shares that are partly paid, subject to the limitations stated in this Article. Such shares may be acquired by purchase from a member by reason of involuntary termination of a member’s membership, or otherwise. (3) A company may acquire its own shares only subject to the restrictions stated in Article 131. (4) A company may not vote or receive distributions on, and shall not have obligations accruing under, shares of the company while they are owned by the company.

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(5) Shares of a company which have been owned by the company for a year from the date of their acquisition shall be cancelled by the company in accordance with Article 122.

Article 120 Pledge of Shares

(1) A company may pledge shares in the company only if the amounts secured by the pledge are less than the market value of the pledged shares. (2) A pledge by a member of his shares to the company shall be treated as an acquisition of the shares by the company for all purposes of this Chapter.

Article 121 Loans by a Company to Acquire its Shares Prohibited

(1) A company may not grant loans or other financial support to any person for acquisition of its shares. (1) Paragraph (1) of this Article shall not apply to transactions by banks or other financial institutions in the normal course of business or to transactions for acquisition of shares by employees or the company or a related company. However, any such transactions shall be subject to the restrictions of Article 131 of this Law.

Article 122

Cancellation of Shares (1) A company may cancel its own shares which it has acquired by purchase or otherwise. (2) A cancellation of shares may be effected by decision of the company’s members or, without such a decision, in accordance with any applicable provisions of the company’s Articles of Association or company agreement. (3) A decision to cancel shares shall be entered into the company records and shall state the grounds for cancellation, and the accounting treatment and effect on the company’s capital of the cancellation. (4) All rights and obligations arising from a share shall terminate upon cancellation of that share.

Title 7

Basic Rights of Company Members

Section 1

Transfer of Shares

Article 123 General Restriction on Transfer

Unless provided otherwise in a company’s Articles of Association or company agreement, a share may not be voluntarily or involuntarily transferred unless it is a transfer:

1) to another member of the company or to the company; 2) that has been approved in writing by all of the members of the company; 3) to the transferring member’s spouse, parent, brother, sister, lineal descendant, or spouse of a

lineal descendant; 4) to a member’s legal representative or heir upon his death; 5) to a bankruptcy trustee or similar person in a bankruptcy proceeding against the member; 6) by a pledge for a loan or other obligation of the member that does not grant the pledgee any

voting or management rights or powers in the company; 7) by a merger, division or conversion under this Law; or

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8) in accordance with Article 124 if that Article is applicable.

Article 124 Right of First Refusal on Transfer to Third Parties

(1) This Article shall not apply to a transfer which is exempt from the restriction stated in Article 123. (2) Unless provided otherwise in a company’s Articles of Association or company agreement, a member of a company who wishes to transfer his share in whole or in part to a person who is not then a member must first offer to sell the share or part thereof to the company, and may only transfer it to the third party as provided below.

1) The member shall first obtain an offer to purchase for cash from a third person who, except for the restrictions on transfer in the company agreement, is qualified to be a member of the company. The offer of the third person must be in writing and must state his name, address, offered price, and any payment or other terms of the offer. 2) The member shall deliver the third person’s offer to the company’s directors, and by doing so the member offers to sell to the company at the price and other terms stated in the offer. Within 10 days after receiving the offer, the company directors shall notify all members thereof and call a meeting of all members, to be held not less than 20 days after the notice, to decide whether the company shall make the offered purchase from the selling member on the offered terms. The offer must be approved by a majority vote of the members’ voting power, not counting the selling member. 3) The company must deliver to the offering member written notice of acceptance within 30 days after the company received the offer, or the offer is rejected. If the company makes a counteroffer, the offering member must deliver to the company written notice of acceptance within 10 days after receiving the counter offer, or the counteroffer is rejected. If the company accepts the original offer or the member accepts the counteroffer, the sale shall be completed within 10 days after the acceptance. 4) A company accepting an offer may allocate some or all of the purchased share or part thereof to one or more of its members if all the members who voted in favor of the purchase approve the allocation. If the company is unable to buy the share because of the restrictions in Article 131 , the members who voted for the purchase shall be obligated to do so in proportion to their paid-in contributions. 5) If the offering shareholder’s offer is rejected, the offering member may, during a period of 20 days after the company received his offer, transfer to the third person all (but not less than all) of the offered share or part thereof at the price and in accordance with the other terms of his offer to the company.

Article 125

Transfer in Court Proceedings (1) A company's Articles of Association or company agreement may permit the sale of a share in executive court proceedings against a member. (2) Unless the Articles of Association of company agreement provides otherwise, Article 124 shall apply mutatis mutandis to such sale.

Article 126 Certain Requirements and Consequences of Transfer

(1) A share may be transferred voluntarily only by written contract with duly certified signatures of the transferor and the transferee. A company’s Articles of Association need not be amended to reflect a transfer, unless the company’s Articles of Association provides otherwise. (2) A transferor and a transferee of a share shall be obligated to notify the company of the transfer or proposed transfer immediately upon their entering into an agreement therefor. A company shall give effect to a transfer when it has received notice of the transfer. (3) A transferee of a share will become a member of the company only when he has agreed in writing to be a party to and bound by the company’s Articles of Association and company agreement by signing it and he is registered in the company’s book of shares. (4) A share transfer to heirs shall become effective as of the date the decision on succession becomes valid.

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Article 127 Division and Transfer in Part of a Share

(1) A share may be divided only in case of inheritance, legal succession, and transfer of a share in part or transfer of all of a share to two or more persons. (2) A company’s Articles of Association or company agreement may prohibit division of a share or may permit it only in certain cases such as the case of a transfer by a member to two or more other members. (3) The provisions of this Law on share transfer shall apply to transfers of shares in whole or in part.

Article 128 Pledge of a Share by a Member

(1) A member of a limited liability company may pledge his share as security for a loan or other obligation of the member, unless the company’s Articles of Association or company agreement provides otherwise. (2) Any pledge shall be entered into the company’s book of shares and the Registry and shall become effective and binding for the company and third parties as of the date of registration. (3) Unless the company’s Articles of Association or company agreement provides otherwise, a pledgee shall not have any voting or management rights in the company until and unless he has become a member of the company. (4) An approval of a pledge shall not imply approval for transfer of ownership or membership to the pledgee or any other third party unless the approval so states.

Section 2

Distributions to Members

Article 129 Annual Financial Statements

(1) A company’s directors shall submit annual financial reports and business reports, together with any related auditor’s report, to an annual meeting of members to be adopted by them. (2) Any approval by the members' meeting of a company's annual or oher financial statements shall not affect any right or remedy available to the members if such statements are later found to be incorrect or misleading.

Article 130

General Provisions Regarding Distributions (1) A company may make distributions to its members at any time, unless otherwise provided in the company’s Articles of Association or company agreement and except as provided in Article 131. (2) Unless provided otherwise in a company’s Articles of Association or company agreement, any distributions to members shall be made to them in proportion to their then-current percentages of the aggregate contributions of all members actually paid in to the company at the point in time when the company’s decision to make the distribution is made. (3) Subject to Article 131, a company agreement may contain other provisions regarding distributions, including but not limited to provisions specifying times and amounts for distributions, delegating authority to declare and pay distributions to a specified majority of members or to directors, providing for a record date to determine the identity of members who are entitled to a distribution, or imposing limitations on distributions in addition to those in Article 131. (4) When a member becomes entitled to receive a distribution, he becomes a creditor of the company with respect to the distribution.

Article 131 Restrictions on Distributions

(1) A company may not make a distribution to its members if, after payment of the distribution, either: 1) the company’s assets would be less than its liabilities; or 2) the company would be incapable of paying its debts as they become due in the ordinary course

of the company’s business.

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(2) A company may base a determination that a distribution is not prohibited under this Article on financial statements prepared on the basis of accounting practices which are in accordance with the Law on Accounting and are reasonable in the circumstances or on a fair valuation that is reasonable in the circumstances. A company agreement may require that certain specified financial statements, accounting practices or valuation methods be used for such a determination.

Article 132 Personal Liability for Prohibited Distributions

(1) A member who receives a distribution prohibited by Article 131, and who knew at the time that the distribution was thus prohibited, shall be personally liable to the company for the return of the amount of the distribution. (2) A member, director or other person who causes such a prohibited distribution to be made, and who knew at the time that the distribution was thus prohibited, shall be personally liable to the company for the return of the amount of the distribution. (3) If more than one person has liability under this Article with respect to a particular prohibited distribution, their liability shall be joint and several. (4) A company’s Articles of Association or company agreement may provide that members must provide a guaranty to replenish the company’s basic capital in proportion to their contributions to the extent the basic capital has been reduced if the persons referred to in paragraph (2) of this Article do not reimburse the company for such prohibited distributions.

Article 133 Certain Loans for Capital to be Subordinated

(1) If a member of a company has granted the company a loan at a time when the members acting as orderly merchants would instead have made capital contributions (such as at a time of financial crisis), the member shall be a subordinated creditor under the Law on Bankruptcy for repayment of the loan in a bankruptcy proceeding against the company. (2) If a third party has granted the company a loan at a time when the members acting as orderly merchants would instead have made capital contributions, and a company member has provided the third party with collateral or guarantees for repayment of the loan, then in a bankruptcy proceeding against the company the third party may assert a claim for repayment only of amounts that remain unpaid after exhausting his claims and remedies with respect to the collateral and the guaranty. (3) The provisions of paragraphs (1) and (2) of this Article shall apply mutatis mutandis to other actions of a company member or a third party that are commercially equivalent to the granting of loans as described in paragraphs (1) and (2). The foregoing rules shall not apply with respect to a member or director of the company who holds shares representing less than 10% of the company’s capital. (4) If the company has repaid a loan or other amounts referred to in paragraphs (1) or (2) of this Article within a year preceding the commencing of bankruptcy proceedings against the company, then the member who gave the security or was liable as guarantor shall reimburse the company the amount that was repaid. This obligation shall, however, exist only up to the amount for which the member was liable as guarantor or that is equivalent to the value of the security given by him at the time of the repayment of the loan. The member shall be discharged from the obligation if he makes available to the company, for satisfaction of the obligation, the assets which were granted as security. The foregoing provisions shall apply mutatis mutandis to other legal transactions which are the commercial equivalent of a loan.

Title 8

Members’ Meetings and Decision Making

Section 1

General Provisions and Competence

Article 134

General Provisions Concerning Members’ Meetings

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(1) The members of a company shall act through members’ meetings which all members are entitled to attend and participate in. (2) In a single-member company the decisions of the mambers’ meeting shall be made by the single member or another person authorized by the member. (3) Immediately after the adoption of a decision of a single-member company, the member shall record and sign the minutes and enter the decision in writing in the company’s book of decisions, except that this shall not be required for current operations undertaken under normal circumstances.

Article 135 Competence of the Members’ Meeting

(1) Unless provided otherwise in this Law or in a company’s Articles of Association or company agreement, the following matters are within the exclusive competence of the members’ meeting:

1) approving business operations concluded by founders prior to registration of the company in the Registry; 2) appointment and removal of directors and fixing their remuneration; 3) adopting annual financial reports and deciding the time and amount of distributions to members; 4) appointing internal aditors or independent auditors, approval of their findings and opinions’ and determining their remuneration and other conditions of their engagement; 5) appointing liquidators and confirming of the liquidation balance sheet; 6) increasing or decreasing the initial capital of the company, acquiring and cancelling shares by the company, and issuing convertible bonds and any securities; 7) issuing procuration and other business powers-of-attorney for the company and any company branches; 8) deciding on any additional capital contributions to be required from members; 9) expulsion of members, admission of new members, and approval of transfer of shares to third parties when company approval is required; 10) changes in status, changes in legal form and termination of existence of the company; 11) approving transactions of the company with directors and other persons contemplated by Article 35. 12) acquisition, sale, lease, pledge, and other dispositions of property with a price or market value which exceeds 50% of the company’s assets; 13) Amending the company’s Articles of Association or company agreement; 14) establishing branches; 15) reducing or releasing a member’s obligation to pay his full agreed contribution; 16) adopting a book of rules for members’ meetings; and 17) any other matters which the Articles of Association of company agreement states shall be within the exclusive competence of the members’ meeting.

Section 2

Convening a Meeting and Agenda

Article 136

Convening a Meeting by the Director (1) A members’ meeting shall be convened when necessary but always in cases prescribed by this Law or the company’s Articles of Association or company agreement. (2) A members’ meeting shall be convened by the company’s directors unless the company’s Articles of Association of company agreement provides otherwise and except as provided in Article 137 . The venue of each meeting shall be the company’s registered office, unless the Articles of Association or company agreement prescribes differently or the members decide differently. (3) A regular annual meeting shall be held with an aim of adopting the annual financial reports and making decisions on distributions. The initial annual meeting shall be held not later than 18 months after the company’s initial registration, and later annual meetings shall be held within six months after the end of the company’s business year. (4) Members’ meetings held between the annual meetings shall be known as extraordinary meetings.

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(5) A request to convene a meeting may be submitted to the directors by any member or director at any time.

Article 137

Extraordinary Meeting (1) An extraordinary meeting shall be convened if requested in writing by members with at least 10% of the voting power of all members, unless the Articles of Association or company agreement prescribes that this right belongs to members who represent a smaller percentage of the voting power. The request shall be made to the directors. (2) If the directors do not, within 14 days after receiving the request, grant the request and convene an extraordinary meeting, the request submitters may convene the meeting themselves, stating the agenda. In this case the meeting shall determine the person to bear the costs of the thus convened session. (3) If an extraordinary meeting convened by minority members is not held or lacks a quorum, the minority members may convene an additional meeting not less than three days later, and if the thus convened meeting is not held or lacks a quorum they shall have the right to demand from the court, in noncontentious proceedings, to appoint a person who shall convene the meeting and state the agenda in the capacity of interim legal representative. (4) The court shall be obligated to decide on the minority members’ request within 48 hours after receiving it.

Article 138 Notice and Agenda

(1) A members’ meeting shall be convened by sending mail or email invitations to each member at the addresses stated in the company’s book of shares. (2) The invitations shall be thus delivered to each member not later than 10 days prior to the meeting. (3) The invitation shall contain the registered name and registered office of the company, the time and place of the meeting, the proposed agenda, and any other matters required in the company’s Articles of Association or company agreement. If a decision on amending the Articles of Association or company agreement is proposed the full proposed amendment must be enclosed. The invitation must also include drafts of proposed decisions relating to the agenda, drafts or descriptions of contracts the meeting is to approve, and, when appropriate, financial reports, managing board reports, supervisory board reports and auditors’ reports. (4) The meeting shall make decisions on the issues stated in the agenda and also on issues proposed any member who has informed the other members of his proposal not later than three days prior to the meeting. Matters that are not listed in the invitation or of which members have not been informed can be added to the agenda only if all members are present and do not object to discussing and voting on them.

Article 139 Objection to Procedure

A member who attends a members’ meeting may not object to the procedure for convening or conducting the meeting unless he does so at the meeting or in writing within three days following the meeting.

Article 140

Action Without a Formally-Convened Meeting Unless provided otherwise in a company’s Articles of Association or company agreement, a

members’ meeting may also be held without complying with the procedures prescribed in Article 138 if it is attended by all of the members and if none of the members objects to this or, if it is not attended by all of the members, the non-attending members waive any objection in writing.

Section 3

Procedure for Decision-Making

Article 141 Voting by Proxy

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(1) Unless provided otherwise in a company’s Articles of Association or company agreement, a member may appoint any other person (a proxy) to vote for him by signing a written agreement to that effect. (2) A member of a company may not be represented at a meeting under circumstances where the representative has only part of the voting power of the member’s share. (3) A properly appointed legal representative of an entity shall represent and vote for that entity and shall not be considered a proxy subject to paragraph (1) of this Article. (4) A proxy agreement may be valid for only one members’ meeting including any adjournment and reconvening of that meeting. (5) A director of a company or a related person of a director may not vote or act as a voting representative of an employee of the company.

Article 142 Quorum

(1) At a members’ meeting a simple majority of the voting power on a matter shall constitute a quorum for action of the members on that matter, unless the Articles of Association or company agreement requires a larger majority. (2) If a meeting is not held due to lack of the quorum prescribed in paragraph (1) of this Article, it may be reconvened with the same proposed agenda at a date not less than 10 nor more than 30 days from the date of the first meeting in the manner prescribed in Article 138. At the reconvened meeting one-third of the voting power on a matter shall constitute a quorum for action on that matter.

Article 143 Conduct of a Members’ Meeting

(1) A members’ meeting may adopt detailed procedural rules for the conduct of a meeting which are consistent with the Articles of Association and company agreement. (2) A members’ meeting shall be presided over by a chairman who shall be elected at the beginning of the meeting, unless the Articles of Association, company agreement or rules adopted by the meeting provide otherwise. (3) The authority, obligations and liabilities of the chairman of a meeting may be specified in a company’s Articles of Association, company agreement or rules adopted by a meeting. (4) The chairman at a meeting shall appoint a person to keep minutes of the meeting, two persons to certify the minutes as being accurate, and a person to count votes, unless the Articles of Association, company agreement or rules adopted at a meeting provide otherwise. (5) All directors of a company shall attend each members’ meeting if possible.

Article 144

Required Majorities for Decision (1) The decision of a simple majority of the voting power of a quorum prescribed in paragraphs (1) and (2) of Article 142 shall control on all matters unless a company’s Articles of Association or company agreement requires a higher vote, and except as provided in paragraph (2) of this Article. (2) Unanimous agreement of all members shall be required for the following matters, unless the Articles of Association or company agreement provides for a lower vote (but not less than a simple majority of the voting power of all members): amendment of the company’s Articles of Association or company agreement, increasing or decreasing the company’s initial capital except by additional contributions of members required in the company’s Articles of Association or company agreement; legal status changes of the company by merger, division, transformation, termination or liquidation of the company; making of distributions to members; acquisition by the company of its own shares; or the sale, lease or other disposition of company property having a market value of more than 50% of the company’s net assets. (3) A decision that reduces or eliminates the rights as a member of one or more members in relation to the rights as a member of any other member shall require the agreement of the affected member or members.

Article 145

Meeting by Telephone, Voting by Mail, and Actions Without a Meeting (1) A members’ meeting of a company with not more than 10 members may be held through conference telephone or other audio or visual communication equipment if all of the participants can listen and talk to

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each other. The persons participating in such a meeting shall be considered to be personally present at the meeting. (2) A member may vote at a meeting by mail or other means of document delivery, unless the Articles of Association or company agreement provides otherwise. The Articles of Association or company agreement may contained detailed rules for such voting, including rules specifying the issues which may be thus voted on. (3) Unless a company’s Articles of Association or company agreement requires that action of the members must be taken at a meeting, any action which may be taken at a meeting may be taken without a meeting if a consent in writing, stating the action so taken, is signed by all of the members entitled to vote on such matter.

Article 146

Open and Secret Ballot Voting at a members’ meeting shall be open by voice vote or show of hands, except that voting on

any matter shall be by secret ballot if requested by members who are present and have at 10% of the voting power on the matter in question.

Article 147

Disqualification to Vote (1) A member may not vote at a meeting on decisions that would:

1) eliminate or reduce his obligations to the company including obligations to make contributions; 2) initiate or terminate a lawsuit against him; or 3) approve transactions between him and the company referred to in Article 35

(2) References in paragraph (1) of this Article fo a member include family members of the member and related persons as defined in Article 34. (3) A member shall not be disqualified from voting on decisions to appoint or remove him or a family member or other person related to him from a position as a director, supervisory board member, or liquidator of the company. (4) The voting power of a member whose vote is disqualified shall not be taken into consideration in establishing the quorum or the number of votes necessary for making a decision.

Article 148

Minutes (1) A record of each members’ meeting shall be recorded in minutes. (2) The minutes shall include the time and place of the meeting, the agenda, the name of the person presiding and any persons appointed to certify the minutes or count votes, the issues that were subject to voting, the results of voting for and against, the decisions adopted at the meeting, any objections of members against the holding of the meeting, any dissenting opinions of members, and any objections by directors to decisions made. (3) The list of members present and the documents relating to convening the meeting session shall be filed in the company’s records with the minutes. (4) The minutes shall be signed by the meeting’s chairman and the recording clerk. (5) The foregoing paragraphs of this Article shall apply mutatis mutandis as to meetings and decisions of a company’s board of directors and any supervisory board. (6) Failure to comply with this Article shall not in itself affect otherwise valid company action.

Article 149 Book of Decisions

(1) Decisions adopted at a members’ meeting shall be entered into a book of decisions without delay. The decisions hsall be valid from the moment of adoption, unless otherwise provided in the Articles of Association or company agreement. (2) The provision of paragraph (1) of this Article shall also apply to the decision by the board of directors.

Section 4

Declaration of Nullity of a Meetings’ Decision

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Article 150

Appropriate Application Articles 305-309 of this Law relating to the declaration of nullity of decisions of a joint stock

company shall apply mutatis mutandis to a limited liability company.

Title 9

Director/Board of Directors

Section 1

Status and Method of Work

Article 151 General Provisions Concerning Directors

(1) As used in this Law the term “director” of a limited liability company means a person who has authority to represent and bind the company as provided in Article 25 and, in addition, any person who has management authority in the company and has been elected as a director at a members’ meeting or named as director in the company’s Articles of Association or company agreement. The term “board of directors” means all of the directors collectively. (2) A director may be a member or may be a person who is not a member. The board of directors may consist entirely of persons who are members; it may consist of persons who are members and also persons who are not members; or may consist entirely of persons who are not members.

Article 152 Election of Directors

(1) All directors of a company shall be elected by the members of the company at a members’ meeting, except that the initial directors may be appointed in the Articles of Association or company agrement. (2) A company’s Articles of Association or company agreement may provide for election of directors by cumulative voting in accordance with Article 312, paragraphs (4) and (5) of this Law.

Article 153

Number of Directors and Vacancies (1) A company’s Articles of Association or company agreement may provide that the company shall have a stated number of directors. (2) In such case, if the number of directors falls below that number the remaining directors shall convene a members’ meeting without delay to fill the vacancy, and the remaining members shall perform only necessary tasks before the vacancy is filled, unless the company’s Articles of Association or company agreement provides otherwise. (3) A company’s Articles of Association or company agreement may provide that ,if the meeting of the company fails to fill a vacancy as contemplated by paragraph (2) of this Article, a court shall, upon the request of any member of the company, appoint an interim director to fill the vacancy.

Article 154 Chairman of the Board

(1) Unless a company’s Articles of Association or company agreement provides otherwise, the company’s board of directors shall have a chairman who shall be elected and may be removed at any time by the members. (2) The chairman shall convene and preside at meetings of the board, shall be responsible for the taking of minutes of meetings of the board, and shall also preside at members’ meetings. (3) The Articles of Association or company agreement may also provide that the chairman shall preside at members’ meetings.

Section 2

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Activities

Article 155 Competence of the Board

(1) Unless otherwise provided in a company’s Articles of Association or company agreement, the board of directors shall have the following responsibilities:

1) establishing or approving the business plan; 2) convening members’ meetings and establishing the proposed agenda for those meetings; 3) implementing decisions of the members; 4) establishing record dates and payment dates as of which the company determines the identity of its

members for entitlement to notices, voting, dividends and other purposes; 5) issuing bonds or other securities when properly authorized; 6) implementing the acquisition and cancellation of company shares when authorized; 7) applying for loans and concluding other legal transactions when authorized; 8) determining the amount of dividends if that authority is granted to the board of directors in the

Articles of Association or company agreement. ; 9) determining the record and payment dates for such dividends and for entitlement to vote and other

matters; 10) appointment and removal of any employees of the company and concluding contracts with them

and establishing their remuneration; 11) representation of the company and managing operations of the company in accordance with the

law, the Article of Association and the company agreement; 12) any other matters provided for in the Articles of Association or company agreement.

(2) The board of directors shall not have authority to make decisions on matters which are within the exclusive competence of the members’ meeting as stated in Article 135 unless the company’s Articles of Association or company agreement or a decision of a members’ meeting expressly grants them such authority. (3) Issues which are included within the exclusive competence of the board of directors may not be transferred to or decided by other persons except the members at a members’ meeting. (4) The board of directors shall at all times act in accordance with the law, the Articles of Association and company agreement of the company, and any decisions or instructions adopted by a members’ meeting.

Article 156 Liability for Business Books

The board of directors of a company shall be liable for appropriate business book keeping and internal surveillance of the business.

Section 3

More Than One Director

Article 157 Certain Actions by More Than One Director

(1) If a company has two or more directors, each of them shall have the right to act and bind the company independently, unless the company’s Articles of Association or company agreement provides otherwise. (2) If the Articles of Association or company agreement provides that directors may act only jointly, the approval of all directors shall be required for each act or transaction, except when this would require deferment of a decision and the deferment would harm the company’s interests. (3) If the Articles of Association of company agreement provides that a director is bound to follow instructions of another director and the first director considers instructions given to be inappropriate, he shall notify the other directors for the purpose of deciding jointly on the transaction, unless this would require deferment of a decision and the deferment would harm the company’s interests.

Article 158 Meetings of the Board

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(1) The board shall hold at least six regular meetings each year, one of which shall be held immediately prior to the annual members’ meeting. (2) Apart from such regular meetings the board may hold extraordinary sessions which may be convened by the president at his own initiative or at the request of any member of the board. If the president fails to convene a meeting at the written request of one of the members, the meeting may be convened by the member himself. (3) The convening of extraordinary sessions of the board shall be done in writing, stating the reasons, the time and the place of the meeting, which shall be given to all the members of the board. (4) A meeting of the board may be held through conference telephone or other audio or visual communication equipment if all of the participants can listen and talk to each other. The persons attending a meeting in this way shall be considered to be personally present at the meeting. (5) A meeting of the board may be held without the procedures prescribed in paragraphs (3)-(4) of this Article if it is attended by all of the directors and none of them objects to this or, if it is not attended by all of the directors, the non-attending directors waive any objection in writing. (6) The board may adopt by laws which further govern their procedures so long as the by-laws are not inconsistent with the company’s Articles of Association or company agreement. (7) Paragraphs (1)-(6) of this Article shall apply unless the company’s Articles of Association or company agreement provides otherwise.

Article 159 Action Without a Meeting

Unless provided otherwise in a company’s Articles of Association or company agreement, any action or decision which may be taken by the board at a meeting, may be taken by the board without a meeting if a consent in writing setting forth the action or decision is signed by all of the members of the board entitled to vote on that matter.

Article 160 Quorum and Majority

(1) The quorum for decision making by the board shall be a majority of the total number of members of the board. (2) The decision of a majority of all of the directors shall be the decision of the board. (3) Decisions of the board shall become effective at the moment of their adoption. (4) If the votes of the directors result in a draw, the deciding vote shall be that of the president, who shall vote last. (5) The foregoing provisions of this Article shall apply to a company unless the company’s Articles of Association or company agreement provides otherwise.

Article 161 Disqualification to Vote

The provisions of Article 147 of this Law relating to voting by members shall be applied mutatis mutandis with respect to voting by directors.

Article 162 Committees

(1) The board of a company may form one or more committees comprised of members of the board. (2) The conditions and the manner of work for such committees may be defined by the board in a manner not inconsistent with the company’s Articles of Association or company agreement. (3) Unless otherwise provided in the company’s Articles of Association or company agreement, all actions and decisions of a committee shall be subject to the board’s approval.

Article 163 Minutes

(1) Minutes shall be kept of each meeting of a company’s board or committee of a board and shell be presented for approval at the next-following meeting of the board or committee. The minutes shall be signed by the person presiding at the meeting and the person who took the minutes. (2) The minutes of a meeting shall be written within 10 days after the meeting.

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(3) The minutes shall state the time and place of the meeting, the directors present, the agenda of the meeting, a summary of the discussions, the issues subject to voting, and the results of voting including identification of those who voted in favor, against or abstained. (4) A failure to comply fully with this Article shall not affect otherwise valid action by the board or committee.

Section 4

Status Liability

Article 164 Resignation of a Director

The provisions of Article 329 of this Law relating to resignation of a director shall apply mutatis mutandis with respect to resignation of a director of a limited liability company.

Article 165 Removal of a Director

(1) The members of a company may at any time remove one or more directors of the company with or without stated cause. (2) Any such removal shall be without prejudice to a director’s rights to compensation under any separate contract with the company but such a contract may not eliminate the company’s right stated in paragraph (1) of this Article.

Title 10

Supervisory Bodies

Section 1

Financial Supervision

Article 166 Internal Auditor or Audit Committee

(1) The Articles of Association or company agreement of a limited liability company may provide that the company shall have an internal auditor or an audit committee. (2) An audit committee shall have at least three members and its total number of members shall be odd. An internal auditor shall be an individual person.

Article 167 Election and Removal

(1) An internal auditor or member of an audit committee shall be elected by the members’ meeting from among independent directors if the company has independent directors, and from among other independent persons, except that the initial internal auditor or members may be appointed in the initial Articles of Association or by decision of the founder of the company. All of such persons must be persons who meet the definition of “independent director” in Article 313 applying that Article mutatis mutandis to a limited liability company. (2) An internal auditor or member of an audit committee may be removed by decision of a members’ meeting with or without a stated reason for removal. (3) Any such removal shall not in itself prejudice any right to compensation which the person may have under a contract with the company. Such a contract may not eliminate the company’s rights under paragraph (2) of this Article.

Article 168

Competence and Method of Work

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(1) The internal auditor or audit committee shall report to the members’meeting on the following: 1) the accounting, reporting and financial practices of the company and any related companies; 2) the company’s compliance with legal and regulatory requirements; and 3) the qualifications, independence and performance of the company’s outside auditor.

(2) In performing its functions the internal auditor or audit committee shall review and discuss with the board of directors, and also with the company’s outside auditor when thought appropriate, the matters referred to in paragraph (1) of this Article and specifically the following:

1) the selection, compensation and oversight of the work of the outside auditor; 2) the adequacy and completeness of the annual and other financial statements of the company and

the basis for proposals for distribution of profit and other distributions to members; 3) the adequacy and completeness of the company’s disclosure of financial and other information

to the members; 4) the adequacy of the company’s policies and procedures for compliance with this Law including

but not limited to the provisions of this law relating to financial matters and conflict of interest transactions; 5) the adequacy of the company’s policies and procedures for compliance with other laws

including but not limited to the Law on Registration, the Law on Securities Markets and the Law on Accounting; and

6) procedures for handling any complaints from members, governmental bodies or other persons concerning the foregoing. (3) The internal auditor or audit committee shall present a report to the members on the foregoing at each annual members’ meeting and at any extraordinary members’ meeting when it considers a report to be appropriate or necessary. (4) In carrying out their duties the internal auditor or audit committee may inspect all documents of the company, request statements and explanations of members of the board of directors or employees and inspect the state of the company’s assets. (5) They shall also have the authority to hire legal or other experts to assist in carrying out their duties and to pay reasonable compensation to such experts as determined by the internal auditor or audit committee. (6) More detailed regulations on the competence of such bodies may be determined in the Law on Accounting.

Section 2

[ Auditors

Article 169 Company Auditor

(1) A company shall have an auditor in accordance with the Law on Accounting, with supervisory authority specified in that law. (2) A company’s auditor shall be notified of the holding a members’ meetings simultaneously with the members, so that he can participate in the meeting in accordance with the law.]

Section 3

Commissioner-Experts

Article 170 Appropriate Application

The provisions of Articles 337-339 of this Law relating to the election of a commissioner-expert, his competences and reports relating to joint stock companies shall apply as appropriate to a limited liability company, unless provided otherwise in the Articles of Association or company agreement.

Section 11

Amendment of Articles of Association and Company Agreement

Article 171

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Required Agreement for Amendment (1) A company’s Articles of Association may be amended only by unanimous agreement of all members of the company, unless provided otherwise in the Articles of Association. The Articles of Association may permit amendment of the Articles of Association by fewer members than all, but not by less than a simple majority of the company’s voting power. (2) A company’s company agreement may be amended only by unanimous agreement of all members of the company, unless provided otherwise in the company agreement. The company agreement may permit amendment of the company agreement by fewer members than all, but not by less than a simple majority of the company’s voting power. (3) Notwithstanding the foregoing, any amendment of a company’s Articles of Association or company agreement which increases a member’s obligation to make contributions or which reduces or eliminates his rights shall require that member’s consent. (4) The signatures of company members on amendments to the company’s Articles of Association or company agreement shall be certified.

Section 12


Article 172 Retention of Company Documents and Information

(1) A company must at all times keep and maintain the following: 1) its Articles of Association including all amendments thereto; 2) its company agreement and all amendments thereto; 3) the decision on registration;

4) internal documents approved by its members' meeting and board of directors; 5) foundation documents of every branch and representative office; 6) documents proving the ownership and other rights of the company over its assets; 7) minutes and eecisions of all members'meetings and board of directors'meetings; 8) orders and decisions of its executive body; 9) minutes of any audit committee meeting and their decisions; 10) annual financial reports, reports on business operations and auditors' reports; 11) accounting files and documents; 12) a list of all related companies with the share or other ownership interest in those companies; 13) the book of shares; 14) a list of full names and addresses of all members; 15) a list of all persons authorized to represent the company; 16) a list of all transfers of shares including pledges; 17 a list of contracts between the company and directors; and 18) any annulment of the company's registration.

(2) A company must keep the foregoing at its registered office or abnother place known to and accessible to all of the company's members. (3) A company shall keep its Articles of Association and company agreement permanently. It shall keep the other decuments above for at least five years, and shall then deliver them to the archives in accordance with applicable laws and regulations.

Article 173 Access to Records and Information

The provisions of Articles 346 and 347 of this Law, relating to access to company records and information of a joint stock company and access thereto by court order shall apply mutatis mutandis to a limited liability company.

Title 13

Rights Based on Termination of a Member's Membership in a Company and Termination of

Company

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Section 1

Termination of a Member’s Membership in a Company

Article 174

Events Causing Termination of Membership A member of a company shall cease to be a member upon the occurrence of any of the following events:

1) his death in the case of a natural person; 2) termination of existence as a legal entity in the case of a legal entity; 3) withdrawal of the member in accordance with the company’s Articles of Association of company agreement; 4) withdrawal of a member in violation of the company’s Articles of Association or company agreement; 5) withdrawal of the member in compliance with a court decision; 6) expulsion of the member in compliance with a court decision; 7) expulsion of a member in compliance with the company’s Articles of Association or company agreement; 8) transfer of all of the member’s share other than a pledge or other transfer which oes not entitle the transferee to become a member; 9) an event agreed to in the Articles of Association or company agreement as causing the member to cease to be a member.

Section 2

Withdrawal or Expulsion of a Member

Article 175

General Provisions Concerning Withdrawal or Expulsion of a Member (1) A company’s Articles of Association or company agreement may anticipate and provide for the termination of membership of a member including termination by involuntary expulsion, and may state the grounds, procedure and consequences including possible contractual penalties or a requirement for damage compensation upon expulsion or wrongful voluntary withdrawal. (2) The Articles of Association or company agreement may not deny in advance the right to withdraw from the company and a member may not renounce in advance that right. The same applies with respect to a member’s right to make claims against the company for wrongful expulsion and the company’ right to make claims against the member for wrongful withdrawal.

Article 176 Withdrawal of a Member for Justified Reasons

(1) A member may withdraw from the company for justified reasons, with or without the consent of other members. Justified reasons may include the fact that other company members or the company have caused damage to the member by their actions, that the member has been prevented from exercising his rights in the company, or that the company or company members have imposed unreasonable obligations on him. (2) In a case referred to in paragraph (1) of this Article, the member is entitled to bring proceedings before the competent court aimed at establishing justified reasons for withdrawal, regardless of any prohibition of that which may be contained in the Articles of Association of company agreement. (3) Where such justified reasons are claimed, the withdrawing member shall state the amount of compensation claimed for his share and an acceptable payment deadline. If the claimant’s claim is accepted, the compensation amount shall be based on market value of the share, and the company to pay that amount by a the set deadline. If that amount is not agreed, the court may be requested to decide, in which case the court shall follow the same principle. When prescribing the payment deadline, the court shall take into account the company’s status and its business needs. (4) A member withdrawing from the company for justified reasons is entitled to compensation for the damage caused to him, and a member expelled by the company due to his wrongful conduce is obligated to compensate for the damage caused to the company.

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Article 177

Expulsion of a Member (1) A company’s members’ meeting may initiate an expulsion procedure against a individual member before the competent court if the member fails to make a contribution as required by the company’s Articles of Association or company agreement or if other justified reason exist. (2) Such other justified reasons exist if the member:

1) deliberately or with gross negligence inflicts damage to the company or members of the company; 2) deliberately or with gross negligence violates the Articles of Association or company agreement or

obligations prescribed by law; 3) is involved in an undertaking which makes impossible the execution of business operations

between the company and the member, or 4) by his actions obstructs or significantly hinders the fulfillment of the company’s goals.

(3) A claim for a member’s expulsion may be submitted by the company and any company member. The claim shall state the compensation amount claimed and a reasonable payment deadline. (4) Upon initiation of a procedure for expulsion of the member, the court may suspend his right to vote on any matter and other rights, if it finds that necessary and justified. (5) The company is entitled to compensation for damage inflicted on it by the member who is expelled due to justified reasons.

Article 178

Consequences of Termination of Membership (1) Upon withdrawal or expulsion of a member, the capacity of member and all rights deriving thereof shall cease to exist. The same applies with respect to termination of member capacity on other grounds in accordance with Article 174 of this Law. (2) Such a person whose membership ceases to exist is entitled to the market value compensation of his share at the time of membership termination. (3) Paragraph (2) of this Article shall not apply to a member whose membership was terminated by his death when and his heirs are entitled to take over his share and become the company members. This also applies to legal successors of the legal entity which was terminated. Paragraph (2) also does not apply to a member who sold his share to another person who is entitled to take over his share and become a member. (4) Claims of a company for damages in the case of expulsion of a member for justified reasons or a case of wrongful withdrawal, or other misconduct of the member, shall be offset against the claim of the share value of the member in question. (5) If the share of the member who has withdrawn e is to be paid in consideration in kind, he shall not be entitled to the payment for his share before the expiration of 90 days from the date of termination of membership. (6) Compensation for share value may not be paid if it would violate the restrictions on payment of distributions under Article 131. (7) In order to secure the payment of claims of a withdrew or was expelled, the court may suspend the member from exercising his membership rights in the company. The court may also order interim measures or may order the company to pay the determined compensation amount of the share within a reasonable deadline whose duration depends on the company status and its business needs.

Section 3


Article 179 Events Causing Dissolution

A limited liability company shall dissolve upon the occurrence of any of the following events: 1) expiration of the company’s term stated in the Articles of Association; 2) decision of its members; 3) a final decision of the competent court that the company’s registration was null and void and

ordering deletion of the company from the Registry ex officio;

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4) a decision of the bankruptcy court on opening and concluding bankruptcy proceedings, due to inability to cover the costs of the bankruptcy proceedings from the company’s bankruptcy estate;

5) a final decision of the competent court that the company is dissolved; or 6) an event specified in the Articles of Association as causing dissolution of the company.

Article 180 Dissolution of a Single-Member Company

A single-member limited liability company shall not cease to exist upon opening of bankruptcy proceedings or liquidation against its member or by the death o the member having no legal heirs to his/her stakes.

Article 181 Dissolution and Other Remedies by a Court on Motion of Members

The provisions of Article 349 of this Law relating to dissolution and other remedies respecting a joint stock company shall apply mutatis mutandis to a limited liability company.

Chapter 5

JOINT STOCK COMPANY

Title 1

General Provisions


(1) A joint stock company is a company organized by one or more persons, as shareholders of the company, to conduct business under a common name under this Chapter and this Law, and whose basic capital is divided into shares. As used in this Chapter the term “company” shall mean a joint stock company unless the context requires otherwise. (2) A joint stock company is liable for all of its obligations with all of its assets. (3) A shareholder of a joint stock company is not liable for obligations of the company solely by reason of being shareholder, except that a shareholder shall be liable up to the amount of any contracted but unpaid contribution as provided in Articles 13 and 190 of this Law.

Title 2

Articles of Associations and By-Laws

Article 183

Articles of Association

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(1) The Articles of Association of a joint stock company must contain: 1) the full name and residence address of each natural person founder and the registered name and registered office of each legal entity founder; 2) the registered name and registered office of the company; 3) the business purpose of the company; 4) a statement of whether the company is a closed or an open company; 5) the amount of the company’s initial subscribed and paid-in capital and the method of payment of that capital into the company in exchange for shares; 6) the number and the nominal (par) value, if any, of shares of each type and class that the company is authorized to issue. If the company is authorized to issue one or more classes of preferred shares, the Articles of Association shall state the rights and preferences of each class; 7) the number of shares of each type and class which have been subscribed and which have been issued; 8) the name of initial shareholders whose initial contribution is in kind, a description of that investment, and a statement of the number and types of shares to be issued therefor; 9) duration of the company unless it is perpetual; 10) the total amount, or at least an estimate, of all the costs payable by the company or chargeable to it by reason of its formation and, where appropriate, before the company is authorized to commence business; and 11) any special advantage granted, at the time the company is formed or up to the time it receives authorization to commence business, to anyone who has taken part in the formation of the company or in transactions leading to the grant of such authorization.

(2) The Articles of Association of a joint stock company may also include: 1) the names and addresses of the company’s initial directors; 2) any authorization given to the board of directors to issue authorized shares in accordance with this Law and the company’s by-laws; 3) restrictions on transfer of the company’s shares, if any; and 4) any other matter that under this Law is required or permitted to be set forth in the Articles of Association of by-laws.

Article 184 By-Laws

(1) Apart from the Articles of Association a company may have by-laws regulating the company’s business and governance. (2) The by-laws of a company are not required to be submitted to the Registry. (3) The by-laws must be in writing. (4) The by-laws and any amendments thereto shall have legal effect as of the moment of their adoption unless provided otherwise in the by-laws themselves. (5) Unless the power to make or amend the by-laws is given exclusively to the shareholders in the Articles of Association, the by-laws may be made or amended by the shareholders’ assembly or the board of directors; but no by-law that is adopted by the shareholders’ assembly may be amended or repealed by the board of directors unless the by-laws so provide.

Article 185

Relationship of Articles of Association and By-laws

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In the event of any inconsistency between a company’s Articles of Association and by-laws, the Articles of Association shall control.

Title 3

Special Benefits and Costs

Article 186 Special Benefits

(1) Any special benefits for shareholders or third parties shall be stated in the Articles of Association, which shall state also the persons to whom they are given to and the reasons for giving them. (2) Special benefits shall expire with expiration of the term for which they are awarded, subject to any amendment of the Articles of Association which provides otherwise. (3) If special benefits for shareholders or third parties are not stated in the Articles of Association, any contracts or legal arrangements respecting them shall be null and void. An amendment to the Articles of Association made after a company has been registered may not provide for such contracts or legal arrangements.

Article 187

Founding Costs (1) A company’s Articles of Association may provide that the cost of founding the company shall be borne by the company or by its founders. (2) If not provided otherwise in the Articles of Association, the founders shall bear the cost of founding the company. (3) Such costs may be reimbursed by the company to founders only up to the amount stated in the Articles of Association. (4) If the Articles of Association state that the company shall bear such costs, the costs may be paid or reimbursed from the company’s basic capital.

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Title 4

Contributions

Article 188 Nature of Contributions; Loans to Acquire Shares Prohibited

(1) A shareholder’s contribution for the issuance of shares may be made in money or in kind but not in labor or services, whether past or future. (2) As an exception to paragraph (1) of this Article, a contribution for shares of a closed company may be made in labor or services already performed for the company, if the company’s Articles of Association so provide. (3) A company may not advance funds, make loans, to provide security for the acquisition of its shares. (4) the normal course of business or to transactions for acquisition of shares by employees or the company or a related company. However, any such transactions shall be subject to the restrictions of Article 233 of this Law.

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Article 189

Valuation of Contributions (1) If there are contributions in kind, one or more independent authorized appraisers shall prepare a report stating the value of such contributions. An appraiser may be a natural person or a company authorized to audit in accordance with the Law on Accounting. (2) The report shall describe the contributions in kind, shall state the methods used in determining their value, and shall state whether that value represents at least the number and nominal value of the shares (or the accounting value in the case of shares without nominal value) for which the contributions in kind are to be issued or, where appropriate, the premium over nominal value for which the shares are to be issued. If a contribution includes or consists of a company or an existing business, its balance sheets for the two preceding business years (or, if less, the period of time the company or business has existed) shall be included in the appraisers’ report. The appraisers’ report shall be published in accordance with the Law on Registration. (3) As an exception to paragraphs (1) and (2) of this Article, the valuation of contributions in kind to a closed company may be determined by unanimous (but not less than unanimous) agreement of the shareholders, without independent appraisal, unless the company’s Articles of Association provide otherwise.

Article 190

Payment of Contributions (1) Contributions in cash must be paid up at the time of a company’s registration at not less than 50% of their nominal value or, in the case of shares without nominal value, their accounting value. The remainder must be paid up in full within two years after the company’s registration. (2) All agreed contributions in kind must be paid into a company in full within two years after the company’s registration.

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Title 5

Closed and Open Companies

Article 191 General Provisions Concerning Closed and Open Companies

(1) A joint stock company may be closed or open. (2) Every company must state in its Articles of Association whether it is a closed or an open company. A company shall be an open company if its Articles of Association do not state that it is a closed company.

Article 192

Closed Company (1) A closed company is a company whose shares are and may be issued only to its founders or to another limited group of persons in accordance with Article 242, paragraph (2) of this Law and the Law on Securities Markets (closed placement). (2) The number of shareholders of a closed company shall not exceed 100. (3) If the number of shareholders of a closed company exceeds such limit for a period of one year, the company, if it remains a joint stock company, shall be an open company and shall amend its Articles of Association to so state. (4) A closed company may not conduct an open subscription for shares or otherwise offer its shares to the general public. (5) The provisions of this Law relating to maintenance, increase and decrease of basic capital shall not apply to a closed company unless its Articles of Association states that those Articles shall apply to the company. (6) A closed company may become an open company in accordance with this Law and the Law on Securities. A change from a closed company to an open company shall require amendment of the company’s Articles of Association to state the change in status, but shall not be a change of form within the meaning of this Law.

Article 193

Transfer of Shares of a Closed Company (1) The Articles of Association or by-laws of a closed company may impose restrictions on transfer of the company's shares including restrictions of the kinds referred to in Article 124 relating to limited liability companies. (2) There shall be no restriction under this Law on transfer of shares of a closed company unless the Articles of Association or by-laws of the company so provide.

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Article 194

Open Company (1) An open company may conduct an open subscription for shares and offer its shares to the general public. (2) Any such invitation must be made by prospectus as prescribed by the Law on Securities and must comply in all other respects with this Law and the Law on Securities. (3) An open joint stock company may be listed or unlisted within the meaning of the Law on Securities Markets. (4) An open company may not restrict the transfer of its shares to third parties.

Article 195

Founding Offering of Shares of an Open Company (1) A company shall be deemed founded openly if the founders invite the public to subscribe and buy shares at the time of the company’s initial registration. (2) A public offering of shares at the time of an open company’s founding shall be deemed successful if the offered shares which are required to be subscribed by the terms of the offer, are subscribed in accordance with the company’s Articles of Association, its published prospectus and the Law on Securities Markets. (3) If the shares required to be subscribed are not subscribed pursuant to paragraph (1) of this Article, the offering shall be considered unsuccessful and the founders shall be obligated to refund any amounts paid by subscribers without delay and with any prescribed interest.

Title 6

Founding Assembly of an Open Company

Article 196

Convening the Assembly (1) The founders of an open company shall convene a founding assembly not later than 60 days after the expiration of the term for subscription of shares in the prospectus. (2) The founding assembly shall be convened by written notice to each subscriber given in the manner required by Article 294 of this Law (3) The notice must include copies of the company’s Articles of Association, reports of the founders and appraisers including a report on costs of founding, a list of distribution of shares and list of persons to receive the shares without subscription based on public call with specified number, type and class of shares received in this manner. (4) For good cause shown on request of founders, the competent court may extend the term for the founders assembly by up to 30 days in a non-contentious proceeding.

Article 197

Procedures at the Founding Assembly (1) All subscribers to fully-paid shares shall have the right to attend and participate in the founding assembly and shall have the votes which their subscribed shares would have when issued.

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(2) A simple majority of the subscribed and fully paid shares entitled to vote on a matter shall constitute a quorum for decision of the founding assembly on that matter. (3) The founding assembly shall be opened by the founder in possession of the highest number of subscribed shares or another person elected by the assembly. Such person shall make the list of shareholders present and shall decide whether all the terms defined under paragraphs 1 and 2 of this Law have been met for the founding assembly to proceed. (4) Should the founding assembly not have the quorum referred to in provisions of paragraph (2) of this Article the founders may re-convene the assembly in the same manner, where not less than eight and not more than 15 days shall pass between the two scheduled assemblies.

Article 198

Consequences of Failing to Hold the Founding Assembly (1) If the founders do not convene the founding assembly within the period required by Article 197 of this Law or if for any other reason the founding assembly is not held pursuant to this Law or does not adopt the decisions required by this Law, the founding of the company shall be considered unsuccessful and the founders shall be obligated to refund any amounts paid by subscribers without delay and with any prescribed interest. (2) Not later than 15 days after expiration of the term for the founding assembly the founders shall call all subscribers to make their required payments. The call shall be announced in the same manner as the public offering. (3) Should the founders fail to act pursuant to paragraph (2) of this Article, the competent court may do so in a non-contentious proceeding upon the request of any subscriber.

Article 199

Presiding and Minutes at the Founding Assembly (1) The founding assembly shall elect the chairman, the keeper of the minutes (recording secretary) and two counters of votes, after which reports on founding and assessment (audit) shall be read. Appendices to the reports shall be read only if subscribers with no less than 10% of the votes present at the meeting so require. (2) The minutes on the founding assembly shall be kept by an appointed keeper of the minutes and signed by the assembly chairman and keeper of the minutes, the persons appointed to count the votes and the founders of the company.

Article 200 Matters to be Decided at the Founding Assembly

(1) The founding assembly of an open company shall: 1) determine whether all offered shares have been subscribed and whether all required contributions in kind have been properly made; 2) elect the initial directors unless the Articles of Association has already appointed them; 3) decide on approval of any special rights of the founders and special contracts with founders or other persons (side performance, etc); 4) decide on approval of any valuation of investments in kind; 5) decide on approval of contracts previously made on the company’s behalf which are to be assumed by the company; and 6) determine the costs of founding which are to be paid by the company.

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(2) If more shares than offered by the public invitation have been subscribed, the founding assembly may decide to accept the subscribed surplus in which case the subscribers who subscribed to shares first shall a priority right and if more than one person subscribed the shares at the same time then the surplus shares are accepted in proportion to the shares subscribed by those subscribers which are not surplus. (3) If the founding assembly decides to accept a surplus of subscribed shares, the subscribers of such shares shall have voting rights at the founding assembly from and after the time of the decision to accept them.

Article 201

Voting at the Founding Assembly (1) At the founding assembly each fully paid subscribed ordinary share shall be entitled to one vote. (2) If a quorum is present the affirmative votes of a simple majority of the shares present and entitled to vote on a matter shall be the decision of the founding assembly on that matter, unless a larger majority is provided in the Articles of Association and the prospectus. (3) At the founding assembly decisions shall be made separately and with separate voting for each contribution in kind and each contract or transaction. A person who has made a contribution in kind shall be disqualified from voting with respect thereto and his votes shall not be counted for purposes of determining the quorum for voting or the majority required for decision. (4) Unless provided otherwise in the Articles of Association and the prospectus, at the founding assembly the unanimous agreement of all subscribers shall be required for changes of the provisions of the Articles of Association on the amount of initial capital (possible acceptance of surplus shares). (5) At the founding assembly founders shall not have the right to vote on approving founding costs of the company, and persons who have contracts with the company to be approved shall not have the right to vote on such approval.

Title 7


Article 202

Ordinary and Preferred Shares (1) A joint stock company may issue two types of shares: ordinary (or common) shares and preferred (or preference) shares. (2) A company must have ordinary stock and must issue at least one share of ordinary stock. (3) A company’s ordinary stock may not be divided into classes. (4) A company’s preferred stock may be divided into two or more classes with different rights and preferences from each other (such as different dividend rates, different participating or cumulative rights to dividends, or different rights to distribution of the company’s assets on liquidation of the company). (5) All ordinary shares shall have the same nominal value or shall have no nominal value. All preferred shares of a single class shall have the same nominal value or shall have no nominal value. (6) A company may not issue bearer shares.

Article 203

Authorized and Issued Shares (1) Besides issued shares, a company may have authorized but not issued shares. (2) The number of authorized ordinary shares and the number of authorized preferred shares of each class shall be stated in a company’s Articles of Association. The number of authorized shares of each class may

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be changed only by amendment of the Articles of Association. The number of authorized but unissued shares may not be greater than 50% of the number of issued ordinary shares at the time this number was fixed in the Articles of Association. (3) A company may issue all or only part of its authorized ordinary shares. A company may issue none, part or all of its authorized preferred shares of any class. (4) The decision to issue authorized shares within the maximum number permitted in the Articles of Association, and the decision on the number, time and other terms of any such issuance, may only be made by the company’s shareholders’ assembly unless the Articles of Association confers such authority on the company’s board of directors, in which case the board may make such decisions in accordance with the Articles of Association. Such authorization shall include issuance of shares for new contributions in in cash or in kind as provided in Articles 246-251 of this Law, but shall not include issuance of shares in an increase of capital from the company’s assets as provided in Articles 259-265 of this Law. (5) The board of directors may not be thus authorized to issue any type or class of authorized shares for a period longer than five years from the time the number of authorized shares was established in the Articles of Association, but the five-year period may be renewed once or more times by the shareholders’ assembly, each time for a period not exceeding five years. (6) Shares of a company shall be issued in accordance with applicable provisions of the Law on Securities Markets.

Article 204

Registration of Issuance and Ownership (1) The founders of an open company and when appropriate the company an shall register the issuance of shares or other securities in a public offering with the Securities Commission in accordance with the Law on Securities Markets and applicable regulations of the Securities Commission. (2) A company shall register its shares and other securities, and the identity of the owners thereof, in the Central Registry for Securities in accordance with the Law on Securities Markets and any applicable regulation of the Securities Commission. (3) A company may keep a book of shares which may contain: the personal name or registered name, the place of residence or registered office. and the tax reference number of every owner, co-owner and co-owners’ representative of its shares or other securities; the amount of all contracted and paid-in contributions of each shareholder; any secondary obligations and additional contributions beyond the initial contributions; all pledges of shares; all transfers of shares including the date and the name of the transferor and the transferee; and all changes in any of the foregoing. A company’s book of shares may be kept in electronic form, and a company may employ a financial or other institution to maintain its book of shares. (4) Each company shall inform the Central Registry for Securities of the foregoing including changes thereto in accordance with the Law on Securities Markets. (5) Any shareholder of the company shall have the right to examine and make a copy of the book of shares during the company’s normal working hours. (6) The company’s board of directors shall be responsible for registering the company’s shares promptly and correctly and for maintaining the book of shares correctly, and all of the directors shall be personally liable for any damage caused to a shareholder or third party by the company’s failure to do so.

Article 205

Effect of Registration (1) In the case of registered shares a shareholder, in relation to a company and third parties, shall be a person who is registered as such in the Central Registry for Securities in accordance with the Law on Securities Markets. (2)The date on which a company has received an application for registration shall be considered to be the date of a shareholder’s registration in the book of shares if all the information required for such registration has been provided, regardless of actual time of registration.

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(3) In case of a discrepancy between the Central Registry for Securities and the book of shares, the Registry shall control. (4) A transfer of registered shares in the Central Registry for Securities shall be effected as provided in the Law on Securities Markets.

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Article 206 Rights of Holders of Ordinary Shares

(1) Each ordinary share gives to its holder the same rights as are held by all other holders of ordinary shares, which include but are not limited to:

1) the right to access to legal documents and other information pertaining to and in possession of the company to the full extent provided in this Law, the company’s Articles of Association and the company’s by-laws; 2) the right to participate in the shareholders’ assembly to the full extent provided in this Law, the company’s Articles of Association and the company’s by-laws; 3) the right to vote at the shareholders’ assembly based on the principle that one share gives the right to one vote; 4) the right to receive dividends after any dividends payable pursuant to preferential rights of preferred shares have been paid; 5) the right to receive distribution on liquidation of the company after the claims of creditors and holders of any preferred shares have been satisfied; and 6) preemptive rights to acquire newly-issued shares and other securities of the company to the full extent stated in Article 211, the company’s Articles of Association and the company’s by-laws.

(2) Ordinary shares of a company may not be converted into preferred shares or other securities of the company. (3) The rights referred to in points 4) and 5) of paragraph 1 of this Article may be contractually transferred by a shareholder to a third party at the shareholder’s free will.

Article 207

Rights of Holders of Preferred Shares (1) Each share of each class of a company’s preferred stock give to its holder the same rights and preferences as are held by all other holders of shares such class. (2) Those rights are as stated in the Articles of Association and shall in all cases include priority over ordinary shares with respect to payment of dividends (which in case of preferred shares may be participative or cumulative as provided in the Law on Securities) and to payment on liquidation of the company. (3) Those rights may also include the right to convert the preferred shares into ordinary shares or into shares of another class of preferred stock under terms and in cases stated in the Articles of Association, and the right of the company to redeem the preferred shares at a price and on other terms stated in the Articles of Association. (4) Holders of preferred shares also have the right to one vote per share at any shareholders’ assembly on any issue requiring group voting of holders of a such class of preferred shares as provided in Article 343. Apart from this, a company’s Articles of Association may, but need not, also provide that holders of preferred shares shall have the right to vote with ordinary shareholders on any or all other matters at the shareholders’ assembly if but only if:

1) such preferred shares are convertible into ordinary shares (in which case they may have the number of votes of the ordinary shares they may be converted into); and 2) dividends on such preferred shares which have accrued and are required to be paid have not been paid and remain unpaid.

(5) Except in cases defined in paragraph (4) of this Article, holders of preferred shares shall have no right to vote with ordinary shareholders at the shareholders’ assembly.

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(6) The total number of votes of holders of preferred shares may not at any time be the same as or higher than the total number of votes of holders of ordinary shares. (7) Holders of preferred shares shall have the same rights as the holders of ordinary shares to access to documents and other information in possession of the company and, except as provided in this Article with respect to voting, the same right to attend and participate at the shareholders’ assembly.

Article 208

Securities Other Than Shares; Convertible Securities, Options and Bonds (1) Unless otherwise provided in a company’s Articles of Association, a company may issue securities other than shares including bonds, convertible bonds and options or warrants with the right to acquire shares. (2) For purposes of this Law, an option or warrant to acquire shares is deemed to be a security which gives to its owner the right to acquire a specified number of shares of a specified type and class at a specified price. (3) Convertible securities and securities which give the right to acquire shares may not be issued unless the number of authorized (non-issued) shares that they may be converted into or used to acquire, as stated in the company’s Articles of Association, equals or exceeds the number of shares to be acquired by conversion of the convertible securities or by exersize of the options or warrants. (4) Concurrently with any issuance of securities convertible into shares or options to acquire shares, the company shall note in the Central Registry for Securities the number of authorized shares required to secure the rights of the holders of such securities and, until the expiration of the time period of effectiveness of those rights, the company shall maintain the number of authorized shares of the types and classes in question which shall be sufficient to secure such rights. (5) The decision to issue securities or options referred to in this Article, and the determination of the number, time, price and other terms of issuance shall be made by the shareholders’ assembly. The Articles of Association may not authorize the company’s board of directors to make that decision. (6) A company’s decision to issue bonds, and the determination of the amount and other terms of any such issuance, shall be made by the shareholders’ assembly unless the Articles of Association authorizes the board of directors to make that decision. (7) A company’s issuance of securities, options or bonds shall also be subject to the applicable provisions of the Law on Securities and any regulations of the Securities Commission. (8) Securities convertible into shares may not be issued at a price received by the company which is lower than the nominal value (or, in the case of shares without nominal value, the accounting value) of the shares into which they are convertible. (9) Holders of securities convertible into shares or options to acquire shares shall have the same right as shareholders to be informed and to inspect records and documents of the company, unless otherwise stated in the decision to issue such securities or options or otherwise agreed by such holders.

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Article 209 Dividend and Voting Rights of Partly-Paid Shares

(1) A dividend on partly paid shares shall be payable in proportion to the amount actually paid in for the shares, calculated on the record date for the dividend. (2) Partly paid shares of a closed company shall have the same voting rights as fully paid shares of the same type and class, unless provided otherwise in the company’s Articles of Association. Shares of an open company may vote only if they are fully paid.

Article 210

Amount of Consideration for Shares (1) Shares may not be issued for an amount lower than their nominal value or, in the case of shares without nominal value, their accounting value. (2) Shares may be issued for an amount higher than their nominal or accounting value and the excess amount shall represent a share premium and shall be treated as provided in Article 257 of this Law and in accordance with the Law on Accounting. (3) A company shall issue shares at a price not less than their full value determined by the board of directors in accordance with Article 445 of this Law, except for:

1) issuance of shares at a price established by an option to acquire shares or by a security convertible to shares; 2) issuance of ordinary shares following the procedure set forth in Article 211 of this Law for exercise of preemptive rights to acquire shares of existing shareholders at a price that may not be less than 90% of their full value; 3) issuance of shares at the time of entering the joint stock company into register at the price set at that time in the company’s Articles of Association; 4) issuance of shares in a merger or other reorganization of the company; or 5) issuance of shares to a broker or other intermediary for the purpose of re-sale at full value, at a price that may be less than the full value by no more than the amount of brokers’ commission, set as a percentage of the issue price of the shares, which may not exceed 10% of the full value of the shares;

(4) A company shall issue options to acquire shares or securities convertible into shares at a price not less than their full value as determined by the board of directors in accordance with Article 445 of this Law, except for:

1) issuance following the procedure set forth in Article 211 of this Law for exercise of preemptive rights to acquire such options or securities at a price that may not be less than 90% of their full value; and 2) issuance to a broker or other intermediary for the purpose of resale at full value, at a price that may be less than the full value by no more than the amount of brokers’ commission, set as a percentage of the issuance price, which may not exceed 10% of the full value of such warrants or securities.

Article 211

Preemptive Rights to Acquire New Shares (1) Shareholders of a company shall have a preemptive right to acquire unissued shares of the company’s stock, upon the issuance of such shares, on and subject to the provisions of this Article. Such right shall be a right to acquire the newly-issued shares in proportion to the nominal value (or, in the case of shares without nominal value, the accounting value) of already-held shares of such existing shareholders. For

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purposes of this Article, the term “newly-issued” includes shares which were issued earlier and then reacquired and are being held by the company; the term “shares” includes options to acquire shares and securities convertible into shares; and an issuance of shares shall include an issuance to banks, underwriters or other financial institutions for the purpose of resale in accordance with the Law on Securities Markets. (2) The company shall give each such existing shareholder notice of the proposed issuance which shall state, at a minimum, the number of shares to be issued, the proposed price or method of determining the price of issuance, and the time period and procedure for exercising the preemptive rights. All rules and procedures for execution of this right shall be the same for all entitled shareholders and shall be as stated in the company’s Articles of Association, by-laws, or a decision of the board of directors made in accordance with the Articles of Association. The time period for exercise of the preemptive rights shall not be shorter than 30 days from the day the written notice is sent. (3) Unless otherwise (and except to the extent) provided in the Articles of Association, all holders of ordinary shares, options to acquire ordinary shares and securities convertible into ordinary shares, but not holders of preferred shares, shall have preemptive rights, and there shall be no preemptive rights to acquire any of the following:

1) preferred shares, except for preferred shares which are convertible into ordinary shares or carries a right to subscribe for or acquire ordinary shares; or 2) shares authorized in the Articles of Association that are issued within the time period of six months from the date of company’s entry into the Register.

(4) Shares subject to preemptive rights that are not acquired by existing shareholders pursuant to such rights may be issued to any person within the period of one year after the shares were offered to the existing shareholders pursuant to provisions of this Article, at a price set by the board of directors but not lower than 90% of the price set for the exercise of preemptive rights. Any offer made after expiration of the above time period of one year shall be subject to the right of preemptive rights of existing shareholders under this Article. (5) The preemptive rights provided for in this Article may not be reduced or eliminated in a company’s Articles of Association but may be reduced or elimitated by dacision of a shareholders’ assembly. Any such decision shall be made only after the board of directors has presented to the assembly a written report stating the reasons for the reduction or elimination and justifying the proposed issue price of the share issuance to which it will be applicable. The decision shall be published in accordance with Article 9 of this Law. (6) The preemptive rights provided for in this Article may also be reduced or eliminated by the board of directors for a share issuance as to which it has been granted authority to make decisions under paragraph (4) of Article 203 of this Law.

Article 212

Co-Ownership of a Share (1) A share may have more than one owner. Co-owners of a share shall be considered to be one single shareholder. (2) Unless provided otherwise in a company’s Articles of Association or by-laws, co-owners of a share shall exercise their voting and other rights in the company only through a single joint representative and shall identify that representative to the company in writing to be entered in the Central Registry and kept in the company’s book of shares. (3) Any notice given by the company to such a designated representative shall be deemed given to all of the co-owners. If the co-owners of a share fail to appoint and identify to the company such a representative, a notice given by the company to any co-owner shall be deemed given to all of the co-owners.

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(4) Co-owners of a share shall be jointly and severally liable to the company for all obligations to the company respecting the share. (5) Legal action by a company against one co-owned for such obligations shall have binding effect against all co-owners.

Title 8

Procedure to Identify a Real Shareholder in Interest

Article 213

Questionnaire (1) A company has the right to determine the identity of its real shareholders in interest for the purpose of protecting all shareholders’ interests including but not limited to their interests in transparency regarding control or potential control of the company. (2) For this purpose a company has the right to require from every person for whom it justifiably believes to be its own shareholder, by means of a questionnaire in written form, to answer whether he is the real shareholder in interest and any facts relating to that. (3) A company must send such questionnaire at the request of one or more shareholders holding shares representing at least 10% of the capital of the company. (4) The procedure of identification of real shareholders shall be carried out in the company’s name by its board of directors or a person duly authorized by the board of directors.

Article 214

Duty to Respond to Questions on Real Interest (1) The person required to fill in the questionnaire shall promptly answer the questions asked by the company, and shall do so in writing. (2) If the questioned person is no longer a shareholder in the company that sent him the questionnaire, he must inform the company about the person he has transferred his shares to.

Article 215

Report of Questionnaire Results (1) When the company receives the answers from a questioned person it shall make a report thereon submitted to the Central Registry (2) Should such report cover a significant or majority investment in the capital within the meaning of Article 369 of this law, the company shall submit the report to the registry the company is registered with where the report shall be placed on the company’s file. (3) The report shall be kept with the company’s book of shares. (4) Based on answers obtained and other valid documents and evidence, the company may make appropriate corrections and other entries on its records and report such changes to the Central Registry.

Article 216 Sanctions

If the questioned person fails to respond or should he knowingly give incorrect answers in the questionnaire, the company may request in a non-contentious procedure from the competent court to put a ban on or limit the person’s right to:

1) transfer of shares; 2) vote shares; 3) exersize preemptive rights to acquire newly issued shares; or 4) receive any dividend or other distribution on shares other than a distribution on liquidation of the company.

Article 217

Investigation by Competent Authority

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(1) The Securities Commission may, on its own initiative or if so requested by shareholders holding shares representing 10% or more of a company’s capital, demand from a person full and accurate information on his ownership of shares in the company. (2) Should the questioned person fail to give the demanded information or should he consciously give incorrect information, the Securities Commission may appoint an investigator for the purpose of conducting on-site investigation and the Commission may also, after prior warning, render a decision banning the questioned person from or limiting him in the rights referred to in Article 216 of this Law.

Title 9

Dividends and Other Distributions to Shareholders

Section 1

Principles

Article 218

General Provisions Concerning Dividends (1) A company may authorize and pay dividends on its shares annually in connection with its annual shareholders’ assembly, or at any other time between those assemblies, unless provided otherwise in the company’s Articles of Association. (2) A company’s decision to authorize and pay dividends may be made only by its shareholders’ assembly, unless the power to make that decision has been given, in whole or in part, to the board of directors in the Articles of Association. (3) A company’s Articles of Association may provide that, in cases where the shareholders’ assembly has adopted the annual financial report for the immediately preceding year, profits from that year must be applied in the following order:

1) to cover losses brought forward from previous years; 2) to fund legally prescribed reserves if such reserves are provided for in a specific law; 3) to fund statutory reserves if the company has such reserves; and 4) to fund other reserves.

(4) The shareholders’ assembly may also assign other amounts to reserves in connection with its decision on profit distribution. (5) After a decision to pay a dividend has been made, a shareholder to whom it is to be paid becomes a creditor of the company for the amount of the dividend. (6) A dividend on stock of any type or class shall be paid pro rata to all holders of that type or class of stock, except as provided in Article 209 of this Law in the case of partly-paid stock. Any agreement or arrangement by which a company gives some shareholders specific privileges with respect to dividends shall be null and void.

Article 219

Dividends Payable in Money, Shares or Other Property (1) Dividends may be paid in money but they may also be paid in shares or other securities of the company or other companies, or other property, unless provided otherwise in the company’s Articles of Association. (2) Dividends payable in shares of the company of any type or class shall be subject to the following provisions:

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1) the dividends shall be paid by issuance of such shares pro-rata and without consideration to the holders of the shares of the type and class on which the dividend is being paid; and 2) if shares of a certain type or class are to be issued as dividends on r dividends on another type or class, and there are shares already outstanding of the type or class to be issued, the dividend may not be paid unless it has been approved by a majority of the votes of the shares of the type and class that is to be issued.

(3) Dividends payable in shares of the company shall be subject to the restrictions in Article 233 of this Law.(4) The amount of the dividend payable in shares shall be deemed to be the amount of the nominal value of the shares to be issued.

Article 220

Restriction on Payment of Interim Dividends by an Open Company The following conditions shall apply in the case of dividends paid by an open company during the company’s financial year:

1) interim accounts shall be prepared showing that the funds available for distribution are sufficient; and 2) the amount to be distributed may not exceed the total profits earned since the end of the last financial year for which annual accounts have been prepared, plus any profits brought forward and amounts drawn from reserves available for this purpose, less losses brought forward and amounts to be placed in reserves pursuant to this Law, the Law on Accounting or the company’s Articles of Association.

Article 221

Record Date for Dividends and Other Distributions A company’s Articles of Association may fix, or provide the method for fixing, the record date as

of which the list of registered shareholders entitled to receive a dividend or other distribution, including a distribution on liquidation, shall be determined. If the Articles of Association does not fix or provide for fixing a record date, the board of directors shall fix that date. The dividend or other distribution shall be paid to persons who were registered shareholders of the company on the record date.

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Article 222

Procedures for Authorization and Payment of Dividends (1) Each decision to authorize a dividend made pursuant to Article 218 or Article 220 of this Law shall include:

1) the amount of the dividend; 2) the record date as of which the list of shareholders entitled to receive the dividend shall be determined; and 3) the date on which the dividend will be paid.

(2) If after the record date but before the payment date, a shareholder transfers shares based on which he is entitled to receive the dividend, the right to receive the dividend shall remain with the transferor.

Section 2

Acquisition and Regime of Own Shares

Article 223

Subscription to a Company’s own Shares or Parent’s Shares Prohibited (1) A company may not subscribe to its own shares directly or indirectly through another person who would acquire them on its behalf. (2) A dependent company as referred to in paragraph (2) of Article 368 may not subscribe to shares of its controlling company directly or indirectly through another person who would acquire them on its behalf. (3) If another person has subscribed to or otherwise acquired shares in violation of paragraph (1) or paragraph (2) of this Article, it shall be deemed that such person has taken them for his own account, and such person shall be personally liable to pay the full price for such shares regardless of any agreements with the company on whose behalf they were subscribed to or acquired. Any agreement to reimburse or indemnify such person with respect thereto shall be null and void.

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Article 224 General Provisions for a Company’s Acquisition of its Own Shares

(1) A company may acquire shares or other securities issued by it at any time with the agreement of the holders of such securities either directly or indirectly through a person acting on the company’s behalf, subject to any restriction in its Articles of Association and subject to the restrictions in Article 233. (2) A company may acquire part or all of its preferred stock or other securities other than ordinary shares, but it may acquire only a part of its ordinary stock. (3) An open company may not acquire shares issued by it if and to the extent that, at the time of the acquisition, the total nominal value or accounting value of the acquired shares exceeds 10% of the company’s basic capital except:

1) if the company has sufficient reserves which may be used for the acquisition under this Law, and it uses such reserves for the acquisition; 2) in case of free of charge acquisition of shares; 3) in case of acquisition in a (enforced) collection procedure against shareholders if there was no other way to collect; and 4) in case of merger.

(4) An open company may not acquire its shares by agreement with a shareholder except through an offer to all holders pro rata as provided in Article 226. (5) A company may pay for acquisition of shares or other securities in money, shares or other securities or other property. (6) In all cases a company shall acquire its shares or other securities at their full value as determined under Article 445, unless provided otherwise in the company’s Articles of Association or in a contract between the company and the holder of the securities at the time the securities were issued.

Article 225

Procedures for Company’s Acquisition of its Own Shares

(1) A company’s decision to acquire its own shares or other securities shall be made by the shareholders’ assembly except in the circumstances stated in paragraph (4) of this Article. (2) The decision of the shareholders’ assembly shall specify: the maximum number of shares to be acquired, the time period for which the authorization is given, which shall not exceed 18 months, the purchase price (or the method of determination thereof), and the names of the shareholders whose shares are to be acquired (except in the case of an acquisition of the kind referred to in Article 226). (3) The decision of the shareholders’ assembly may authorize the board of directors to set the time of acquisition, the number of shares to be acquired, the calculation of the purchase price, procedures to be followed in the acquisition and other issues, provided that such determinations by the board shall not be inconsistent with instructions included in the decision of the shareholders’ assembly and the shareholders are informed of such determinations at the next shareholders’ assembly. (4) Notwithstanding the provisions of paragraph (1) of this Article, the board of directors, unless (and except to the extent that) the Articles of Association provides that this is within the exclusive competence of the shareholders’ assembly, may make a decision to acquire:

1) options to acquire shares of the company, securities convertible into shares of the company, or other securities other than shares; or 2) up to 5% of any class of the company’s shares for the sole purpose of distribution among employees of the company or of a single-member dependant company as compensation for their services; and

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3) shares or other securities if the acquisition is deemed necessary to prevent serious and immediate damage to the company.

(5) In any such case the board shall submit a report to the next-following shareholders’ assembly stating the reasons for the acquisition, the number and nominal or accounting value of the acquired shares, and the percentage of shares .

Article 226

Procedures for Acquisition of Shares Pro Rata From all Shareholders (1) If a company offers to acquire shares of a particular type or class pro rata from all holders of such shares, the company shall send a written offer to all such holders in accordance with this Law, stating the number of shares to be acquired, the purchase price (or the method of calculating the purchase price), the procedure for payment and date of payment, and the procedure and the deadline for all shareholders to offer their shares for sale to the company. If the company has more than 500 shareholders that deadline must be at least 30 days after the date of the company’s offer. (2) If the total number of shares offered for sale to the company exceeds the number of shares the company will acquire, the company shall acquire shares from each shareholder in proportion to the number of shares the shareholder has offered for sale, except where necessary to avoid acquisition of fractional shares. (3) If the total number of shares offered for sale to the company exceeds the number of shares the company has offered to acquire the company may decide to acquire a higher number of shares up to the total number of the shares offered for sale by shareholders.

Article 227

Status of Reacquired Shares (1) After a company has acquired shares issued by it, company shall own such shares and may reissue them to other persons in accordance with this Law and the Law on Securities. (2) Such shares must be disposed of within one year when they do not exceed 10% of the basic capital. In the cases referred to in paragraph (3) of Article 224 in which the shares represent more than 10%, such shares must be disposed of within three years. (3) If the shares are not disposed of as required by paragraph (2) of this Article, the board of directors shall be obligated to cancel them without decision thereon of the shareholders’ assembly (and the number of authorized shares of such type and class shall be accordingly reduced) by amendment of the company’s Articles of Association made in accordance with Articles 266-273 of this Law if it is applicable. (4) During the time such shares are owned by the company:

1) the nominal or accounting value of such shares may be included in or excluded from the company’s capital, but if it is excluded it shall constitute a reserve which may not be distributed to shareholders; 2) the shares will not be entitled to vote or to be counted toward a quorum at a shareholders’ assembly; and 3) the shares will not be entitled to receive dividends or other distributions or to be counted in calculating the per-share amount of and dividends or other distributions.

Article 228

Pledge of Own Shares Prohibited (1) A company may not directly or indirectly pledge its shares unless the amount secured by the pledge is less than the market value of the pledged shares at the time of the pledge.

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(2) The acceptance of a company’s own shares as security, either by the company itself or through a person acting in his own namebut on the company’s behalf, shall be treated as an acquisition by the company.

Article 229

Registration of Acquisition or Pledge A company shall register any acquisition or pledge of its shares in the Central Registry of

Securities in accordance with the Law on Securities Markets and shall record it in its book of shares if it has a book of shares.

Section 3

Redemption of Preferred Stock or Other Securities

Article 230 Grounds for Redemption and Annulment

(1) A company’s Articles of Association may provide: 1) that the company shall have the obligation and/or the right, in the presence of sufficient funds, to redeem, during a specified period or in specified cases, in full or in part, its preferred shares of one or mere classes; and 2) that the holders of such shares shall be obligated to sell them to the company in such circumstances.

(2) A company may issue options to acquire shares or securities other than shares under terms which provide that the company has the obligation and/or the right, in the presence of sufficient funds, to redeem such securities during a specified period or in specified cases, in full or in part. (3) A company shall redeem preferred shares, options to acquire shares, and securities other than shares in proportion to the number of the securities in question belonging to each holder thereof, except when necessary to avoid redemption of fractional shares.

Article 231 Price for Redemption

(1) Preferred shares shall be redeemed at the price specified in the company’s Articles of Association or, if the Articles of Association does not establish the redemption price, at their publicly traded market price or, if there is none, at the full value of the shares determined by the company’s board of directors in accordance with Article 445 of this Law, or by an independent appraiser who is chosen from a list kept by the competent court by either the shareholders’ assembly, the board of directors or dissenting shareholders under Article 444 of this Law. A company’s Articles of Association may establish a stated redemption price or a formula or model for calculating the redemption price. Options to acquire shares and securities other than shares shall be redeemed at the price established in the conditions of issuance of the options or securities in question. (2) If a company lacks sufficient funds to effect a required redemption, the redemption shall be effected at the first point in time when the company has such funds.

Article 232

Registration of Redemption A company shall register any redemption of its shares or other securities in the Central Registry of Securities in accordance with the Law on Securities Markets and shall record it in its book of shares if it has a book of shares.

Section 4

Restrictions on Payments

Article 233

Restrictions on Payment of Dividends and Other Distributions

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(1) Except in a reduction of basic capital pursuant to Articles 266-273 of this Law, an open company may not make a distribution to its shareholders if either:

1) after payment of the distribution, the net assets of the company would be less than the sum of the basic capital of the company plus any reserves that may not be distributed to shareholders pursuant to this Law or the Law on Accounting; or 2) in the case of a dividend, the amount of the dividend exceeds the amount of the company’s profit in the immediately-preceding business year plus any profits brought forward and amounts drawn from reserves in accordance with this Law or the Law on Accounting.

(2) A closed joint stock company may not make a distribution to its shareholders if, after payment of the distribution, the company’s assets would be less than its liabilities. (3) In addition to the restrictions stated in paragraphs (1) and (2) of this Article, no open or closed company may make a distribution to its shareholders if:

1) after payment of the distribution the company would be incapable of paying its debts as they become due in the ordinary course of the company’s business; or 2) on the payment date any matured dividends on prior preferred shares are not paid in full.

(4) A company may base its determination that a distribution is not prohibited under this Article on financial statements prepared on the basis of accounting practices which are in accordance with the Law on Accounting and are reasonable in the circumstances, or on a fair valuation that is reasonable in the circumstances. A company’s Articles of Association or by-laws may require that certain specified financial statements, accounting practices or valuation methods be used for such a determination.

Article 234 Personal Liability for Prohibited Distributions

(1) A shareholder who receives a distribution prohibited by Article 233 and who knew (or should have known under the circumstances) that it was prohibited, shall be personally liable to the company for return of the amount of the distribution.. (2) Directors shall also be liable as provided in Article 331 of this Law.

Section 5

Loans and Capital

Article 235 Certain Loans for Capital to be Subordinated

(1) If a shareholder of a company has granted the company a loan at a time when the shareholders acting as orderly merchants would instead have made capital contributions (such as at a time of financial crisis), the shareholder shall be a subordinated creditor under the Law on Bankruptcy for repayment of the loan in a bankruptcy proceeding against the company. (2) If a third party has granted the company a loan at a time when the shareholders acting as orderly merchants would instead have made capital contributions, and a company shareholder has provided the third party with collateral or guarantees for repayment of the loan, then in a bankruptcy proceeding against the company the third party may assert a claim for repayment only of amounts that remain unpaid after exhausting his claims and remedies with respect to the collateral and the guaranty. (3) The provisions of paragraphs (1) and (2) of this Article shall apply mutatis mutandis to other actions of a company shareholder or a third party that are commercially equivalent to the granting of loans as described in paragraphs (1) and (2). The foregoing rules shall not apply with respect to a director or shareholder of the company who holds shares representing less than 10% of the company’s capital. (4) If the company has repaid a loan or other amounts referred to in paragraphs (2) or (3) of this Article within a year preceding the commencing of bankruptcy proceedings against the company, then the shareholder who gave the security or was liable as guarantor shall reimburse the company the amount that was repaid. This obligation shall, however, exist only up to the amount for which the shareholder was liable as guarantor or that is equivalent to the value of the security given by him at the time of the repayment of the loan. The shareholder shall be discharged from the obligation if he makes available to the company, for satisfaction of the obligation, the assets which were granted as security. The foregoing provisions shall apply mutatis mutandis to other legal transactions which are the commercial equivalent of a loan.

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Title 10

Initial Capital

Section 1

General Provisions Regarding Capital of a Company

Article 236

Minimum Initial Capital (1) The monetary value of the initial capital contributed by each shareholder of a closed company may not be less than 10 EURO in dinar countervalue calculated per mean exchange rate. (2) The monetary value of the initial capital of an open company may not be less than 25,000 EURO in total. (3) Laws other than this Law may require higher initial capital for banks, insurance companies and companies engaging as joint stock companies in other activities.

Article 237

Minimum Nominal Value of Shares (1) A company may issue shares with nominal (par) value or shares without nominal value. (2) The nominal value of a share shall not be lower than 5 EURO in dinar countervalue, at the medium rate of exchange on the day of filing application for entry of founding of the company into the Registry or application for entry of change of the initial capital of a company into the Registry. (3) Shares shall not be issued in an amount lower than the lowest amount of the initial capital referred to in Article 236 of this Law. (4) Shares shall not be issued in an amount lower than their nominal value, i.e. the value of the initial capital covering one single share without a nominal value. (5) Higher nominal amounts of shares shall be in dinar value expressed in whole numbers divisible by 10. (6) Shares without nominal value shall participate in the initial capital of a company equally. The amount of the initial capital covering one single share shall not be lower than the amount set in paragraph (2) of this Article. Provisions of paragraph (4) of this article shall apply accordingly to shares without nominal value. (7) Participation of shares with nominal value in the initial capital shall be determined by the ratio between the nominal value of shares and the nominal amount (value) of the initial capital and, in case of shares without nominal value, by the initial capital covering that number of shares.

Article 238 Consolidation and Distribution of Shares

(1)A company may divide each share of any class into two or more shares reducing at the same time nominal value of shares of that class, without changing the initial capital. (2) A company, for the purpose of consolidation of its capital may merge all shares of any class into a lower number of shares of that class, increasing at the same time their nominal value, without changing the initial capital. (3) A company may cancel shares it has acquired, increasing at the same time nominal value of other shares, without changing the initial capital of the company. (4) A company may perform activities referred to in provisions of paragraphs (1) - (3). of this Article only if such activities shall not dilute or in some other way infringe upon the rights of warrant holders to acquire shares of certain class, or the rights of replaceable bond holders to convert their bonds into shares of certain class, i.e. into the shares that are to be merged or divided. (5) In case the consolidation of shares has formed fractional shares, the company shall buy them at the market value and, in case there is no established market value, at the price established by independent appraiser (auditor) in accordance with this law. (6) Provisions of paragraphs (1) - (5). of this Law shall also apply to companies that have issued shares without nominal value. (7) Consolidation of the initial capital and shares shall require amendment of the Articles of Association to state the number and nominal value of shares, and such changes shall be made in accordance with this law.

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Article 239

Maintenance of Initial Capital of an Open Company An open company shall maintain minimum initial capital as required by this or any other

applicable law, permanently. Should the initial capital of the company be reduced for any reason below the minimum required level, the company shall restore it to the required level within six months, unless, during this time period, the company is transformed into another form to which wuch requirement does not apply. . Otherwise, any person who has legal interest may demand cessation of the company.

Increase of Initial Capital

Sub-section 1.

General Provisions

Article 240 Decision

(1) The intital capital of an open company shall be increased by decision of the shareholders’ assembly, except in the case when such a decision may be adopted by the board of directors in accordance with Article 204 of this Law. (2) A increase of initial capital of a joint stock company shall be shown in an amendment to the Articles of Association. (3) A decision on increase of initial capital of a joint stock company shall state the amount of increase, the method of increase, the method and time of distribution of profit among participants in the increase, the date of payment of contributions, and other issues in accordance with the Law Regulating the Securities. (4) A decision on a new issuance of shares on the basis of new contributions may be adopted only after full payment of subscribed shares from the previous issuance which was successful in accordance with paragraph (2) of Article 246 of this Law, unless the Articles of Association or a decision on issuance stipulate that 9/10 of agreed shares are sufficient. (5) The provisions of paragraph (4) of this Article shall not apply to increase of initial capital during merger and consolidation, or in the case of increase of initial capital in contributions in kind and for increase of initial capital by issuing shares to employees in the company or related companies.

Article 241

Method of Increase (1) The initial capital of an open company may be increased:

1) through new contributions; 2) by converting convertible securities into shares and subscribing shares on the basis of rights of guarantee holders to such subscription (conditional increase); or 3) from the company’s assets.

(2) In an increase of initial capital of a company either new shares shall be issued or the nominal or. accounting value of existing shares shall be increased.

Article 242

Closed and Open Issuance (1) Shares of a joint stock company in an increase of the initial capital shall be issued through a closed issuance or open (publicly announced) issuance.

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(2) For purposes of paragraph (1) of this Article an issuance is: 1) closed, if the shares are issued to existing shareholders, to holders of convertible securities or other securities which carry the right to acquire such shares, or or to a limited number of investors in accordance with this Law and the Law on Securities; and 2) open, if the shares are issued to persons without preemptive rights, in accordance with the Law on Securities.

(3) A closed joint stock company may conduct only a closed issuance. An open joint stock company may conduct a closed or an open issuance.

Article 243

Value of Shares from New Issue Shares in a new issue shall be issued at full value as defined in Article 445.

Sub-section 2

Increase of Initial Capital with New Contributions

Article 244

Increase of Initial Capital with Contributions in Money and/or in Kind (1) The initial capital of a company shall be increased with new contributions which may be in cash in kind, in accordance with the decision on increase of such capital. (2) If contributions are made in kind, the decision on the increase of initial capital shall state the subject or right which the company thereby acquires, the person from whom it is acquired, the number and nominal or accounting value and number of shares without nominal value which are acquired by such contributions. (3) If the data stipulated in paragraph (1) of this Article is not stated, the contracts on contributions in kind and related legal activities with respect to the joint stock company shall be deemed invalid. After registering the increase of initial capital of the company, failure to act in accordance with the provision in paragraph (1) of this Article shall not affect the validity of the increase, and the shareholder who entered this contribution is obligated in this case to pay in the nominal value of the share or the higher amount of emission, or the respective accounting value for shares without nominal value. (4) Contributions in kind shall be valued by one or more independent appraisals in accordance with of Article 189 of this Law.

Article 245

Entering the Decision into Registry and Publishing (1) A decision on the increase of initial capital of a company with new contributions shall be entered in the Registry and published in accordance with the Law on Registration. Subscription of shares on the basis of this decision may not begin prior to recording and publishing the decision in the Registry. (2) A decision on the increase of initial capital may not be submitted for registration after the expiration of the six-month deadline from the date of adoption.

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Article 246

Subscription of New Shares (1) Shares from the issuance of shares for the increase of basic capital of a company shall be subscribed and issued in accordance with this Law and the Law on Securities. (2) Issuance on the increase of initial capital on the basis of new contributions shall be deemed successful if the requirements stated in the decision on issuance and the published prospectus are met, in accordance with the Law on Securities. (3) Subscribed shares from the issuance of shares for the increase of initial capital of a joint stock company with new contributions shall be paid in in accordance with Article 190 of this Law. (4) Shares of a joint stock company on the basis of new contributions may be issued also to those taking over the issuances in accordance with the Law on Securities. (5) If new shares, during the increase of initial capital, are issued at a higher amount than the issuance amount of the portion of initial capital which is allocated for that purpose, this surplus represents premium issuance. (6) If new shares are issued at an amount exceeding the nominal or accounting value, the surplus must be paid in prior to entering the increase of basic capital in the Registry.

Article 247

Reporting to the Securities Committee and Recording in the Central Registry (1) If the issuance of shares on the basis of new contributions is deemed successful in accordance with Article 246, paragraph (2) of this Law, this shall be reported to the Securities Commission in accordance with the Law on Securities market. (2) After receiving the report by the Securities Commission on the success of the issuance of shares on the basis of new contributions, the Registry shall be informed without delay, for the purpose of recording newly issued shares and their shareholders, i.e. for the purpose of recording the increase of nominal value of existing shares or the accounting value of shares without nominal value.

Article 248

Acquisition of Shares and Confirmation (1)Shares or confirmations on shares shall be issued to subscribers of shares in proportion to the paid in contributions or to the contributions entered into the company assets on the basis of increase of initial capital with such contributions. (2) New shares or confirmations of shares may be issued after recording specified in paragraph (2) of Article 247 of this Law. New shares or confirmations on shares issued prior to this recording in the Registry are null and void, and the board of directors and the issuer shall be jointly and severally liable to the shareholders for the damage caused by such issuance. (3) Issuance of shares and confirmation on shares as specified in paragraph (1) of this Article shall be understood to mean recording in the appropriate accounts in the Central Securities Registry.

Article 249

Entry into Registry, Publication and Effect (1) An increase of initial capital shall be entered into the Register and published pursuant to the Law on Registration. (2) The initial capital of a joint stock company shall be deemed increased as of the day of entry into the register thereof.

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Sub-section 3

Conditional Increase of Initial Capital

Article 250

Assumptions (1) When adopting a decision on the issuance of convertible securities and securities with the right to acquire shares, the shareholders’ assembly must at the same time adopt a decision on the conditional increase of initial capital with an amount with which would cover the rights of holders of these securities for their conversion into shares (conditional increase of capital). (2) The amount of initial capital specified in paragraph (1) of this Article may not exceed one half of the initial capital which exists at the time of adoption of this decision. (3) A decision by a shareholers’ assembly contrary to the decision on conditional increase of capital shall be considered null and void.

Article 251

Content of the Decision A decision on conditional increase of capital of a joint stock company shall state: 1) the purpose of conditional increase; 2) the persons who may exercise the right to receive the shares (such as holders of securities with the right to acquire shares, or convertible bond holders); 3) the time period and conditions for exercising the right; 4) the price for which the shares are issued or a method by which it can be determined; and 5) with the decision in point 2) of this Article and the division of rights to the employees and members of the board of directors, the goal, timeframe within which persons entitled to this right may exercise it, as well as waiting period before exercising this right for the first time which may not be shorter than two years form the date of adoption of decision.

Article 252

Entry into Registry, Publishing and Effect (1) A decision on a conditional increase of initial capital shall be entered into the Registry and published in accordance with the Law on Registration. (2) The shares to be received may not be issued beofre registration and publication pursuant to paragraph (1) of this Article.

Article 253

Statement on Exercising the Right of Registration and Conversion (1) The right of holders of convertible securities to conversion into shares shall be stated by completing a written statement that they have been converted into shares. This statement substitutes registration/subscirption of shares and paying for shares. (2) The right of holders of securities with the right to acquire shares shall be exercised by completing a written statement about the registration of shares during new issuance for the purpose of increase of initial capital with new contributions in accordance with this Law. (3) The statements specified in paragraphs (1) and (2) of this Article shall state the number of shares and their nominal value or, for shares without nominal value, their number, and if shares of several classes are

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issued they shall state the different classes, if contributions in kind are entered it shall contain stipulations from Article 189 of this Law, as well as the date when the decision on conditional increase of capital was adopted. (4) Statements on registration of shares that do not contain data required in paragraph (3) of this Law or which contain limitations to the liability of the person giving the statement shall be deemed null and void. (5) Regardless of the nullity of the pre-emptive right to register issuance of shares, a person giving the statement may not refer to the nullity of the statement if he had previously, on the basis of this statement, excercised rights as a shareholder and fulfilled the obligations of a shareholder. (6) Limitations not contained in the statement on the right to acquire shares shall not be valid.

Article 254

Informing the Securities Commission and Entering into the Central Registry

(1) After the procedure specified in Article 253 of this Law is completed, this shall be reported to the Securities Commission in accordance with the Law on Securities. (2) After receiving the report from the Securities Commission specified in paragraph (1) of this Article, the Central Securities Registry shall be informed without delay, for the purpose of entering the newly issued shares and their shareholders. (3) If the company keeps a book of shares, the entries specified in paragrpah (1) of this Article shall be added to the book of shares.

Article 255

Acquisition and Confirmation of Shares (1) New shares or confirmation of shares may be issued after registration specified in Article 254 of this Law. New shares or confirmation on shares issued prior to this registration shall be deemed null and void, and the issuer and board of directors shall be jointly and severally liable for damages of such issuance. (2) Issuance of shares and confirmation of shares as specified in paragraph (1) of this Article shall be understood to mean subscribing at appropriate accounts in the Central Securities Registry. (3) During a conditional increase of initial capital, the board of directors of a company shall issue shares or confirmation of shares in accordance with paragraph (1) of this Article only for the purpose of fulfilling the adopted decision. (4) The board of directors shall issue shares in exchange for convertible bonds only if the difference between the amount at which these bonds have been issued and the greater amount of initial capital relating to the shares issued for that purpose, is covered from other reserves, which can be used for that purpose, or by additional payments by a person who is authorized to convert a bond for a share. This shall not apply if the total amount for which the bonds have been issued reaches the total amount of initial capital which refers to shares issued for them or if it exceeds that amount.

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Article 256 Entering Increase into Registry and Publishing

(1) Within 30 days after the end of the business year, the representatives of a company shall submit an application to the Registry on the increase of initial capital on the basis of total amount of shares issued in that year by converting convertible bonds and exercising right to subscription of shares of securities holders. (2) The application specified in paragraph (1) of this Article shall be submitted together with other evidence and documents determined by the law regulating registration of business entities. (3) The increase of initial capital of a company by converting convertible securities into shares and by issuing shares to holders of securities with the right to acquire shares shall be published in accordance with the Llaw on Registration. Upon registering and publication, it shall be deemed that the initial capital of a joint stock company has been increased.

Sub-section 4

Increase in Initial Capital from the Company's Assets

Article 257 Assumptions

(1) The shareholders’ assembly of a company may decide to increase initial capital of a company by converting capital reserves, other reserves and retained earnings into initial capital of the company. Such a decision shall state the value of initial capital that is to be increased, the reserves and capital reserves that are to be converted into initial capital, whether new shares are to be issued in such an amount or par value of the existing shares is to be increased (or in case of no par value shares their accounting value) and the time limit for shareholders to exercise their rights. (2) Capital reserves, other reserves and retained earnings of a company may not be converted into initial capital where losses are reported in the profit and loss account representing the basis for such a decision. The reserves intended for a specific purpose may be converted into initial capital only if such conversion is in line with the designated purpose. (3) A decision to increase initial capital of a company from company assets shall be based on annual financial statements of the company for the preceding year, provided that they have been approved by the auditors and duly adopted no later than eight months before applying for entry of such decision into the Registry. (4) Where the shareholders’ assembly fails to appoint special auditors for the above purpose, the auditors appointed by the shareholders’ assembly to audit the latest annual financial statements or the auditors appointed by non-litigious court, as the case may be, shall be deemed so appointed.

Article 258

Holders of Rights Arising from an Increase in Initial Capital from the Company’s Assets

(1) The company's shareholders at the moment of passing a decision to increase initial capital of the company, according to the records of the Central Securities Register, and/or the company's shareholders on the day specified in a decision to increase initial capital of the company, shall be entitled to free shares issued as a result of the increase in initial capital of a joint-stock company, which are available for such

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purposes in compliance with Article 257 hereof, in proportion to their share in the existing initial capital of the Company. Any decision of the General Meeting to the contrary shall be deemed null and void. (2) The subscribers to the shares, and/or the shareholders who have partly paid up their shares shall also have the right referred to in paragraph 1 of this Article in proportion to the portion of their paid up shares in the initial capital of the company. (3) The right referred to in paragraph (1) of this Article shall also belong to own shares held by the company, in proportion to their share in the existing initial capital of the company. (4) The holders of bonds convertible into shares, and the holders of warrants with the right to subscribe to shares shall also have the right referred to in paragraph (1) of this Article in proportion to the nominal or accounting value of shares that belong to them on the basis of the conversion of the convertible bonds or their exercising the right to acquire to shares.

Article 259

Fractional Shares (1) Where in increasing initial capital of a company from company assets, a person acquires a fractional share, such right may be transfered and inherited. (2) The rights arising from a new share may be exercised if the rights referred to in paragraph (1) of this Article, which together make up a whole share, are combined in one shareholder, or if more than one holder of such right, whose rights to a part of a share together make up a whole share, decide to exercise such rights together.

Article 260

The Right to Dividend and to a Share in the Assets of a Company in Liquidation (1) New shares acquired on the basis of an increase in initial capital of a company from the company’s own assets, and/or a portion of nominal or accounting value of shares, which is increased on the same basis, shall be entitled to a dividend or to a share in the assets of a company in liquidation for an entire business year in which a decision to increase initial capital of a company from its own assets is passed, unless otherwise determined in such a decision. (2) A decision to increase initial capital from own assets may determine to include new shares in the distribution of the company's profits and the distribution of dividends to shareholders for a business year that elapsed before the passage of such decision, where such decision is passed before the decision to distribute profits for a business year that precedes the year in which the decision to increase initial capital from own assets has been passed.

Article 261

Notification of the Securities Commission and Entry into Central Registry

(1) Following the completion of the procedure referred to in Articles 257 and 258 of this Law, the Securities Commission shall be notified, in accordance with the Law on Securities. (2) Upon receipt of the decision passed by the Securities Commission referred to in paragraph (1) of this Article, the Central Registry is promptly notified to make an entry of the new issue of shares and their holders, and/or to make an entry of an increase in the nominal or accounting value of the shares. (3) If a joint stock company keeps a book of shares, the entries specified in paragraph (1) of this Law shall also be recorded in the book of shares.

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Article 262 Acquisition of Shares and Share Certificates

(1) New shares or share certificates resulting from increase in initial capital of a company from own assets may be issued after the registration provided for in paragraph (2) of Article 261 of this Law. New shares or share certificates issued before such registration shall be null and void, and the issuer and the board of directors shall be jointly and severally liable for damage caused by such issue to shareholders. (2) The issue of shares and share certificates as provided for in paragraph (1) of this Article shall be understood to mean the entry into relevant accounts of the Central Securities Register.

Article 263

Registration, Publication and Effectiveness of the Decision (1) A decision on increase in initial capital of a joint-stock company from its assets shall be submitted to the register for registration and publication in accordance with the Law on Registration. (2) Initial capital of a company shall be increased from company assets as of the date of publication of entry of such decision into the Registry. (3) The decision on increase in initial capital of a company from company assets shall be null and void unless entered into the register within three months from the date of its adoption. This period shall be terminated if legal proceedings for contesting such decision have been initiated in accordance with the provisions of Articles 305-309 of this Law.

S e c t i o n 3

Reduction of Initial Capital

Sub-section 1

General Rules

Article 264

Decision (1) Initial capital of a company shall be reduced pursuant to a decision of the shareholders’ assembly. (2) Initial capital of a company shall be reduced pursuant to the decision of the board of directors on withdrawal and cancellation of the company shares which have been acquired pursuant to the decision of the shareholders’ assembly in accordance with this Law. (3) Initial capital of a company shall be reduced pursuant to the decision of the board of directors on withdrawal and cancellation of shares upon fulfilment of the conditions specified in the Articles of Association of the company. (4) The Articles of Association shall be amended to reflect the decision on reduction of initial capital. (5) The decision on reduction of initial capital shall specify the level, purpose, type and method of reduction of initial capital.

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Article 265 Type of Reduction

(1) Reduction of initial capital of a company may be carried out through regular reduction, simple reduction and reduction for the purpose of conversion into reserves. (2) Initial capital of a company may be reduced simultaneously with the increase in its initial capital.

Subsection 2

Regular Reduction

Article 266 Methods

Regular reduction of initial capital of a company shall be carried out through: 1) withdrawal and cancellation of acquired own shares and withdrawal and cancellation of shares held by shareholders; 2) decrease in par value of shares or accounting value of no par value shares; or 3) reimbursement of the amount paid by shareholders for partly paid-up shares and non-issue of such shares.

Article 267 Withdrawal and Cancellation of Shares

(1) When reducing the initial capital of a company the first shares to be withdrawn and cancelled shall be shares owned by the company which must be cancelled pursuant to Article 227, paragraph (3) of this Law. (2) In case a joint-stock company holds none of its own shares, its initial capital may be reduced by withdrawal of shares held by shareholders in accordance with the provisions of Articles 230-232 hereof and cancellation of such shares. (3) Withdrawal and cancellation of shares held by shareholders and regular reduction of initial capital resulting therefrom may only be undertaken after fulfilment of the requirement from Article 271 hereof regarding protection of the rights of creditors of a joint-stock company, except in the following cases when initial capital is not reduced:

1) when the fully paid-up shares placed at the disposal of the company free of charge are withdrawn and cancelled; 2) when the fully paid-up shares are withdrawn and cancelled from the assets available for such purposes in accordance with Article 233 hereof; 3) in case of no par value shares, when the general meeting decides to increase the participation of the remaining shares in initial capital of the company by withdrawal and cancellation of shares, or if the board of directors is authorised to withdraw and cancel the company shares and adjust the number of shares in the memorandum of association accordingly, or in case of par value shares, when the withdrawn shares are cancelled and the par value of non-withdrawn issued shares is increased up to the amount that is sufficient to avoid reduction of initial capital and when the withdrawn and cancelled shares have been acquired from the assets available for such purposes in accordance with Article 233 hereof; or 4) in the event of simultaneous issue of new shares with par value equal to the par value of withdrawn shares or accounting value of withdrawn shares in case of no par value shares as provided for in Article 277 hereof.

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Article 268 Relevance

The provisions of Article 267 shall apply mutatis mutandis in the event of reduction in capital stock as a result of reduction of the nominal value of a class of shares with nominal value or reduction of the book value of shares without nominal value, and in the event of reduction in capital stock as a result of paying off the paid capital for partly paid shares or not issuing such shares.

Article 269

Principle of Equality (1) A resolution authorizing regular reduction in capital stock of a company shall not violate the principle of equality of stockholders of one class of shares. (2) The principle of equality of shareholders of one class of shares shall be exercised through proportionate cancellation of the shareholders' shares, i.e. proportionate reduction of nominal value of shares with nominal value or book value of shares without nominal value, as well as through cancellation of shares and reduction in capital stock arising from trading at stock exchange and other securities markets or from public offerings to interested parties, as provided for in the Law on Securities, the Articles of Association or ordinary resolution required to authorise reduction in capital stock. There shall be stated in a tender for cancellation whether shares shall be exchanged in whole or in part. (3) If it has been set out by resolution authorising reduction in capital stock of a corporation that the said reduction shall be rendered at a fixed amount, which amount may not be achieved through tenders for cancellation at stock exchange and other securities markets or through public offerings, the above resolution shall be altered in that the fixed amount shall be changed or another mode of reduction in capital stock shall be resorted to. (4) The principle of equality of shareholders of one class of shares shall also be exercised through reduction in capital stock (subscribed capital) as a result of the corporation not allotting to stockholders those unpaid shares which they have failed to pay on time or the corporation paying off any paid up capital with regard to paid shares, as provided for in this Act.

Article 270

Filing with the Registry and Public Notice Any resolution authorizing regular reduction in capital stock of a company shall be filed with the

Registry and public notice of the registration shall be issued pursuant to the Law on Registration.

Article 271 Notice of Resolution and Protection of Creditors' Rights

(1) Upon filing with the Registry, there shall be issued with an in-between period of 30 days two public notices of a resolution authorising regular reduction in capital stock of a corporation with an invitation to creditors to file their claims.

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(2) Creditors whose non-mature claims have arisen prior to the second notice of the registration of the above resolution may claim their rights no later than 90 days following the second notice. Creditors who shall have priority in claiming their rights in the event of bankruptcy and other creditors prioritized may not claim their rights in the above case. (3) In the event of regular reduction of capital stock of a company, stockholders' claims shall be settled following a period of 90 days since the date of the second notice of registration of the resolution of concern, after creditors' duly filed claims have been settled.

Article 272

Filing with the Central Securities Registry (1) Any reduction in capital stock of a company shall be filed without delay with the Securities Registry for creating in relevant stockholders' accounts records on cancelled shares or reduced nominal, i.e. book values of shares, or for removing from records any partly paid shares for which the stockholders have been paid off by the company. (2) The records pursuant to paragraph 1 of this Article shall be made to the company's register of shareholders should the corporation avail of any such register.

Article 273

Filing with the Registry, Public Notice and Effective Date (1) Regular reduction in capital stock shall be filed with the Registry and public notice of the registration shall be issued pursuant to the Law on Registration. (2) Regular reduction in capital stock of a corporation may not be filed with the Registry before the creditors claims pursuant to Article 271 have been settled and said reduction has been filed with the Securities Registry pursuant to Article 272. (3) Capital stock of a corporation shall be deemed to have been reduced by the nominal, i.e. book value of cancelled shares, i.e. by the amount of reduction of the nominal value, e.i. book value of shares. (4) Subscribed capital of a corporation shall be deemed diminished as of the date of notice of the registration of reduction in capital by the amount paid off to shareholders of partly paid shares.

Sub-section 3

Simple Reduction

Article 274

Principle (1) There shall be a simple reduction in capital stock of a corporation for the purpose of covering losses having arisen during the process of trading. The above purpose shall be stated in any resolution authorizing simple reduction in capital stock. (2) Simple reduction in capital stock of a corporation shall be rendered solely to the extent that the corporation does not avail of any unallocated profits, capital gains or provisions meant for this purpose. (3) Simple reduction in capital stock of a corporation shall not be subject to the provision of Article 271 with regard to the invitation to creditors to file their claims and the protection of creditors rights upon regular reduction in capital. (4) Reduction in capital stock under paragraph 1 of this Article shall be subject mutatis mutandis to the provisions of Articles 266 - 270 and 272 – 273 of this Law.

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Subsection 4

Reduction for Purpose of Creating Reserves

Article 275 Limit

(1) Provision of Article 271 with regard to the invitation to creditors to file their claims or the protection of creditors' rights upon regular reduction of capital stock shall not apply by reason of any reduction in capital stock meant for creating reserves for future losses and increase in capital, which reduction does not exceed 10% of the capital stock. (2) By reasons of paragraph (1) of this Article, reserves created shall be equal to the amount of capital stock reduced as a result of cancellation of shares or to the amount of capital stock reduced as a result of reduction of nominal value of shares with nominal value, i.e. book value of shares without nominal value. (3) Reduction in capital stock under paragraph (1) of this Article shall be subject mutatis mutandis to the provisions of Articles 266 -270 and 272 - 273.

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Sub-section 5

Capital Stock Following Reduction

Article 276 Instruction

(1) Annual financial statements for the business year preceeding the year of resolution authorising reduction in capital stock of the joint stock company shall contain such amounts of value of capital stock, capital gains and revenues reserves as are expected to arise following the reduction of capital stock. The above instruction shall apply unless otherwise provided by an annual financial report. (2) Resolutions authorising reduction in capital stock and financial statements shall be adopted at the same time. (3) Public notices of financial statements shall be issued as provided for in the Law on Securities only after filing with the Registry resolutions authorising reduction in capital stock.

Sub-section 6

Simultaneous Decrease and Increase

Article 277

The Lowest Amount of Decrease (Reduction) (1) The initial capital of a joint stock company may not be decreased, in regular reduction procedure, below the minimum amount of the initial capital of the company as stipulated in provision of paragraph (2) of Article 236 of this Law, or else, either liquidation or bankruptcy procedure shall be instigated against the company. (2) As an exception to paragraph (1) of this Article, regular reduction of the initial capital of a joint stock company even below the above minimum shall be possible if a decision on increase of the initial capital up to the level of the above minimum is brought at the same time as the decision on reduction, provided that such increase is not realized in investment in assets (property) and rights. (3) Decisions on regular reduction and simultaneous increase of the initial capital of a joint stock company shall be null and void if the increase of the initial capital is not entered into the register within six months of the day of the decision. This time period shall not run during dispute procedure instigated by motion to overturn the decision on decrease or increase of the initial capital and/or while awaiting approval for such actions from the competent state authority, if such approval is required. Decisions on simultaneous decrease and increase of the initial capital of a joint stock company and the increase of the initial capital itself may be entered into the register only together. (4) Provisions of Article 237 of this Law on minimum nominal value of shares shall also apply in case of simultaneous decrease and increase of the initial capital.

Title 11

Shareholders’ Assembly

Section 1

General Provisions Concerning the Shareholders’ Assembly

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Article 278

Excercising Shareholders’ Rights (1) The highest governing body of a joint stock company is its shareholders’ assembly. (2) Every shareholder shall have the right to attend the shareholders’ assembly, vote if his shares carry the right to vote, ask questions and receive answers regarding matters included on the agenda, and make proposals for the agenda as provided in Article 287 of this Law. (3) Paragraphs (2) and (3) of Article 134 of this Law (relating to a single-member limited liability company) shall apply mutatis mutandis to a single-shareholder joint stock company. (4) Members of the board of directors and members of any supervisory board of a company and the company’s independent auditor shall attend the shareholders’ assembly if possible regardless of whether they are shareholders.

Section 2

Types of Assembly

Article 279

Annual Assembly (1) The shareholders’ assembly shall be convened at least once a year to review the company’s annual financial statements and decide on profit distribution, among other purposes (the annual assembly) (2) The annual assembly shall be held not later than the later of three months after preparation and submission to the board of the company’s annual financial statements for each financial year or six months after the end of the company’s financial year. The annual assembly shall be held on a date and at a time stated in the company’s Articles of Association or, if not there stated, shall be fixed by the board of directors in a manner consistent with the Articles of Association and this Law. (3) The annual assembly shall be held at the registered office of the company unless the Articles of Association specify a different place or, if not so specified, the board of directors specifies a different place. (4) Failure to hold the annual assembly at the time required by this Article shall not affect otherwise valid company action.

Article 280

Extraordinary Assembly and Convening by Minority Shareholders (1) Apart from the annual assembly, a company shall hold an extraordinary assembly either:

1) at the call of the board of directors or any other person who is authorized by the Articles of Association to call an extraordinary assembly; 2) at the call of the liquidator if the company is in liquidation ; or 3) upon the written demand of holders of at least 10% of all the votes entitled to be cast on an issue at the proposed extraordinary assembly. Such a demand must be dated and signed by all of such shareholders, and must identify such shareholders and state the number of shares they each hold, must state the purpose or purposes for which the assembly is called and the agenda for the assembly, the demand shall be considered to have been received by the company if it has been delivered to the company’s registered office addressed to the board of directors. The demand may be made in more than one document signed by different shareholders who comprise, in total, the required percentage.

(2) The record date for determining the list of shareholders entitled to demand an extraordinary assembly shall be the date on which the first shareholder has signed the demand. (3) The board of directors must make a decision to convene or refuse to convene such a meeting within 10 days days after the demand has been received as stated in paragraph (2) of this Article. Not later than seven days after making its decision the board shall send written notice of the decision to each of the persons demanding the assembly at the addresses stated in the demand. A decision to refuse to convene an extraordinary assembly must stated the reasons for the refusal. (4) Such a demand may be refused:

1) if the procedure stated in paragraph (1), point 3) of this Article has not been fully complied with;

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2) if the shareholders who have submitted the request do not hold the required number of votes; or 3) if none of the proposed issues for the extraordinary assembly is within the competence of a shareholder assembly.

(5) An extraordinary shareholders’ assembly may make decisions only on matters stated in the demand made pursuant to paragraph (1) point 3) of this Article.

Article 281

Court-Ordered Assembly (1) If an annual assembly has not been held within the time period required by Article 279 of this Law, the competent court may order the assembly to be held upon the request of any shareholder who is entitled to attend and vote at an annual assembly, or any director of the company. The court shall have power to appoint an interim representative empowered to convene or preside at the assembly, set the place and date of the assembly, and set its agenda in accordance with this Law. (2) If an extraordinary assembly has not been held within the earlier of 30 days after delivery of the demand under paragraph (1) of Article 280 or the date fixed for the assembly pursuant to paragraph (3) of that Article, the competent court may order the assembly to be held upon the request of any shareholder who signed the demand. (3) In the cases referred to in paragraphs (1) and (2) of this Article, the court shall make a decision within 48 hours after the request has been properly filed. (4) A company shall bear the expenses of any shareholders’ assembly held by court order.

Article 282 Extraordinary Assembly of Closed Company

An extraordinary shareholders’ assembly may be held without a proper convening of a session and without publishing the agenda if all shareholders with a right to vote are present and if no shareholder dissents.

Article 283

Extraordinary Assembly in Financial Crisis A company’s directors shall convene a shareholders' assembly without delay if it has been learned

during preparation of annual or other financial statements that the company faces a loss which amounts to 50% or more of the company’s basic capital.

Section 3

Procedure and Notice for Convening an Assembly

Article 284 Regulations

(1) Written notice to each shareholder of an annual assembly shall be given not less than 30 nor more than 60 days before the date of the annual assembly, and written notice to each shareholder of an extraordinary assembly shall be given not less than 15 nor more than 30 days before the date of the extraordinary assembly. The notice shall be given by mail or email (but only if the shareholder has agreed in writing to notice by email) to each shareholder of record who is entitled to vote at the assembly. The notice shall be given by or at the direction of the chairman of the board or another director, or by another person who is authorized to call the meeting. The date of mailing shall be considered the date of the notice in the case of notice sent by mail. (2) As an exception to paragraph (1) of this Article, an open company need not give individual notice to each shareholder if its announcement published in accordance with paragraph (3) contains all of the information stated in the first sentence of paragraph (4) and, in addition, states that the company will provide copies of the documents referred to in the second sentence of paragraph (4) to any shareholder who requests them, at the company’s registered office during regular business hours. (3) An open company shall also announce each shareholders' assembly continuously on the company’s website during the applicable time period referred to in paragraph (2) of this Article and shall, in addition, be announced in at least one daily newspaper distributed throughout Serbia with a print run of at least

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100,000 copies, not less than 30 nor more than 60 days before the date of the assembly in the case of an annual assembly, and not less than 15 nor more than 30 days before the date of the assembly in the case of an extraordinary assembly. (4) The notice of an annual assembly shall state the date, time and place of the meeting, the company’s proposed agenda and list of issues to be voted on at the meeting (including candidates for election to the board of directors and any proposal for dividends).The notice shall be sent with the company’s annual report, balance sheet and profit and loss statement together with related auditors’ reports, a report of the board on the company’s operations, the text of any proposed amendments to the Articles of Association, a description of any contracts or transactions proposed for approval, and any other matters which are required to be in the notice by the company’s Articles of Association, this Law, the Law on Securities or any other law. (5) The notice of an extraordinary assembly shall state the date, time and place of the meeting, a description of the purpose for which the assembly is to be held, and the agenda which is proposed by the persons who called or demanded the meeting .

Article 285 Waiver of Notice in Writing

Whenever any notice is required to be given under this Law or a company’s Articles of Association or by-laws or other rules or regulations, a waiver of such notice in writing signed by the person entitled to such notice shall be deemed equivalent to the giving of such notice.

Article 286

Waiver by Attendance (1) A shareholder’s attendance at an assembly shall constitute a waiver of any objection by the shareholder:

1) to a lack of notice or defective notice of the assembly, unless the shareholder objects at the beginning of the assembly to the holding of the assembly or taking action at the assembly because proper notice was not given; and 2) to consideration of any particular matter at the assembly that is not within the agenda or purposes stated in the notice of the assembly, unless the shareholder objects to considering that matter when it is presented at the assembly.

(2) If a shareholder makes an objection to an assembly of the nature referred to in paragraph (1) of this Article, the company’s board of directors shall give a written response to the shareholder within five days after receiving it.

Article 287 Agenda for an Assembly

(1) At a shareholders' assembly, decisions may be made only on matters within the scope of the applicable notice and agenda referred to in this Chapter, but this restriction shall not prevent discussion of other matters. (2) A shareholder or shareholders holding at least 10% of all the votes entitled to be cast for the board of directors of a company shall have the right to propose and require that a maximum of two new issues be included on the agenda. Any such proposal must be submitted in writing within seven days from the date at which the convening of an annual shareholders’ assembly has been announced, or within five days in the event of an extraordinary shareholders' assembly. Each proposal shall include the names of the shareholders making the proposal, the number of votes they have (to the extent known to the proposer); and shall be submitted to the company, addressed to the board of directors at the company’s registered office. For the purpose of this Article, no shareholder shall be counted in more than one group holding a stated percentage of votes. (3) If the board fails to respond to a shareholders’ request made pursuant to paragraph (2) of this Article, or if it rejects the request, the competent court shall have the power, on request of any submitting shareholder, to order that the shareholders’ request must be granted. The court shall make its decision within 48 hours after receipt of the request.

Article 288 Chairman at an Assembly

(1) A chairman shall preside at each shareholders’ assembly.

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(2) The chairman shall be elected at the beginning of the assembly if the agenda properly provides for that. (3) The chairperson may also be designated or appointed as provided in the company’s Articles of Association or (if not there provided) by the board of directors. (4) The chairman may establish rules and regulations for the conduct of the assembly which are fair to the shareholders.

Article 289

Record Date (1) A company’s Articles of Association may specify or provide the method for setting the record date for determining the list of shareholders who are entitled to notice of an Assembly, to demand convening of an extraordinary assembly, to vote, to submit minority shareholders’ proposals in accordance with this Law and to take any other action. (2) If the Articles of Association does not specify or provide the method for setting the date referred to in paragraph (1) of this Article, the board of directors may do so. If the board of directors does not do so:

1) in the case of an assembly other than an extraordinary assembly convened pursuant to a demand by shareholders under Article 280 of this Law, the record date shall be the date on which the notice of the meeting is first given under paragraphs (1) and (2) of Article 284; and 2) in the case of an extraordinary assembly convened pursuant to a demand by shareholders under Article 280, the record date shall be the date on which the first demand was signed and dated by a shareholder under that paragraph.

(3) A record date may not, in any event, be more than 60 nor less than 10 days before the assembly at which action is to be taken. (4) The list of shareholders for an assembly shall be compiled as of the record date from the shareholder list in the Central Registry for Securities and shall be available at the company’s registered office to all shareholders entitled to vote at the assembly for inspection and copying at their own cost and for the opportunity to object to any irregularities in the list. (5) Such list of shareholders shall contain the name and address of each shareholder, the number of voting shares held by each shareholder.

Article 290

Voting in Person or by Proxy (1) A shareholder may vote his shares in person or by an authorized representative (a proxy) who has been appointed and whose authority shall be subject to this Article. (2) A shareholder may appoint a proxy only by power of attorney in writing which names the person who shall be the proxy and states the number, type and class of shares for which the proxy is given. If so provided in the company’s Articles of Association, the power of attorney may be given in electronic format if its authenticity can be secured assured. (3) Signed copies of the power of attorney shall be delivered both to the proxy and the company. (4) A power of attorney shall be valid for only one assembly, which for this purpose includes any reconvening of an assembly which was adjourned for reasons of lack of time, lack of quorum or otherwise. (5) If the power of attorney does not contain instructions on how to vote on a matter, the proxy shall exercise the right to vote on that matter only in good faith with the purpose of serving the shareholder’s own best interest. If the power of attorney contains instructions on how to vote on a particular matter, the proxy must vote in accordance with those instructions. (6) A person or an affiliate of a person who is a director or management body member of a company or of a controlling shareholder of a company may not be a proxy for an employee or an affiliate of an employee of the company.

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(7) If a shareholder who is entitled to vote at an assembly transfers his shares to another person before the assembly, he shall retain the right to attend the assembly and vote but may grant that right to his transferee by a power of attorney under this Article. (8) The liability of a proxy for exercising the right to vote as provided in this Article not be released or limited in advance. (9) A shareholder who has given the power of attorney may revoke it at any time prior to voting at the assembly meeting by a written revocation delivered to the company or by attending the meeting and voting in person.

Article 291

Voting Verification (1) Unless otherwise provided in a company’s Articles of Association or by-laws, the chairman of at a shareholders’ assembly shall appoint a keeper of the minutes, two shareholders to review and endorse as being accurate, and a voting committee to act as provided in this Article. (2) The voting committee shall be composed of at least three members who shall:

1) verify the list of shareholders present in person or by proxy and verify the identities of the proxies; 2) verify the number of shares and number of votes of each shareholder and each proxy; 3) verify the validity of each power of attorney appointing a proxy and the instructions in each power of attorney; 4) count ballots; 5) verify and announce results of voting; 6) transfer the ballots to the company’s archive for safekeeping; and 7) perform other activities in accordance with any rules of procedure of the assembly.

(3) The voting committee shall be obligated to act in an impartial and fair manner towards all shareholders and to submit a signed, written report about its work which shall serve as evidence of the voting results at the assembly but which shall not be free from challenge by any shareholder acting in good faith. (4) In the case of a company with more than 50 shareholders, a member of the voting committee may not be a director, a management body member, a candidates to either body, or an affiliate of any thereof.

Section 4

Informing Shareholders and Competence

Article 292

Right of Shareholders to Information at Assembly (1) At each annual shareholders' assembly the company’s board of directors shall make an accurate and complete report to the shareholders on the state and operations of the company including its financial condition. (2) If the company has acquired its own shares, the board shall state in its report on the state of the company the reasons for the acquisition, the number and nominal or accounting value of the acquired shares, whether they were acquired without consideration or were paid for, the amount paid, the number of its own shares the company holds and the number of shares which it has reissued. (3) If a shareholder is denied information requested pursuant to this Article, he may request that this denial be recorded in the minutes of the assembly together with the reasons for the denial.

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(4) A shareholder may ask the competent court to order that such information be provided. Such request shall be made not later than 15 days after the day the assembly meeting at which the information in question was denied.

Article 293

Competence of the Assembly The following matters are within the exclusive competence of the shareholders’ assembly and may be decided only by the shareholders’ assembly:

1) Amendment of the Articles of Association, including but not limited to amendments that (i) establish, increase or decrease the authorized number of shares of, or change the rights or preferences of, any type or class of stock, (ii) increase or decrease the company’s basic capital (but not including amendments which may be made by the board under Article 341 of this Law); 2) adoption of the company’s annual financial statements including reports of the board of directors, auditors and supervisory board (if there is a supervisory board) relating to those financial statements; 3) election or removal of directors; 4) authorization and concluding of a merger, division, transformation into a limited liability company or other type of trade company, or other structural reorganization of the company, or a major transaction in accordance with this Law; 5) termination and winding up of the company; 6) appointment and removal of the company’s independent auditors; 7) other matters stated in this Law or the company’s Articles of Association to be within the exclusive competence of the shareholders’ assembly; and 8) matters submitted to the assembly by the company’s board of directors for decision.

Article 294

Approval of Financial Statements by the Shareholders’ Assembly (1) The board of directors shall submit to the annual shareholders’ assembly the financial statements and statements on business transactions together with statements thereon by the supervisory board, if there is one, and the statement by the auditor thereon, for inspection and approval. (2) Any approval by the shareholders’ assembly of a company’s annual or other financial statements or any other statements shall not affect any right or remedy available to the shareholders if such statements are later found to be incorrect or misleading.

Section 5

Method of Work and Voting Procedures

Article 295

Quorum Required for a Vote (1) A simple majority of the total number of votes of the shares entitled to vote on a matter shall constitute a quorum for action of an assembly on that matter, unless the company’s Articles of Association requires a greater quorum. (2) If an assembly is adjourned because of lack quorum it may be reconvened with the same proposed agenda but not later than 15 days from the date of the adjournment. The quorum required at such a

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reconvened assembly shall be one-third of the votes of the shares entitled to vote, unless the Articles of Association require a greater quorum. (3) If there is no quorum at such reconvened assembly or it is not held within such time period, another assembly must be convened and held in accordance with this Law. (4) The presence or absence of a quorum at an assembly shall be determined prior to beginning deliberations on the agenda items at the assembly. Once a share is represented at a meeting, it shall be deemed present for quorum purposes to the end of the meeting, unless otherwise provided in the company’s Articles of Association. (5) Any amendment of a company’s Articles of Association that adds, changes or deletes a greater quorum or voting requirement must meet the requirements of the same quorum requirement and be adopted by the same vote required under the quorum and voting requirements then in effect or proposed to be adopted, whichever is greater. (6) If at an assembly the required quorum is present for action on some but not all of the matters to be considered, action may still be taken on the matters as to which a quorum is present. In any event, a properly convened meeting may decide on the time and place for a reconvened meeting as referred to in paragraph (2) of this Article. (7) If a company’s Articles of Association or this Law requires voting by a single type or class of shares on a matter, the quorum for such voting shall be as provided above in this Article.

Article 296 Vote Required for a Decision; Definition of Qualified Majority Vote

(1) If a quorum is present, the affirmative vote of a simple majority of the votes of the shares present in person or by proxy and entitled to vote on that matter shall be the decision of the assembly on that matter, unless a greater number of votes or voting by classes is required by this Law or the company’s Articles of Association. (2) Whenever this Law states that a qualified majority of votes is required on a matter, the term “qualified majority” shall mean the affirmative votes of at least two-thirds of the votes of all of the shares entitled to vote on that matter (whether or not present at the assembly) unless the company has provided otherwise pursuant to paragraph (3) of this Article. (3) The Articles of Association of any company may supersede the two-thirds vote requirement of paragraph (2) of this Article as to that company by specifying any smaller or larger vote requirement not less than a simple majority of the votes of all of the shares entitled to vote on the matter and not less than a simple majority of all of the shares of each class of shares entitled to separate group voting on the matter.

Article 297 Voting Rights of a Share

(1) Except as provided in this Article, each outstanding ordinary share shall be entitled to one vote on every matter voted on at an assembly, and each outstanding preferred share shall have only the voting rights stated in the company’s Articles of Association, which shall be subject to the restrictions stated in paragraph (4) of Article 207of this Law. (2) Shares held by the company are not outstanding shares and may not be voted. Securities other than shares may not vote. (3) A company’s shares may not be voted at an assembly if the shares are owned, directly or indirectly, by another entity and the company owns, directly or indirectly, shares or other interests in that other entity which entitle the company to control the voting by that other entity of that other entity’s shares of the company.

Article 298 Certain Voting Agreements Prohibited

(1) An agreement by a shareholder or a proxy to vote following instructions of the company or any director or management body member of the company shall be null and void.

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(2) An agreement by a shareholder to vote, or to refrain from voting, in return for privileges or other consideration provided to him by the company or any director or management body member of the company, shall be null and void.

Article 299 Meeting by Conference Telephone

An assembly in a company with not more than ten shareholders may be held through conference telephone or other audio or visual communication equipment if all of the participants can listen and talk to each other. The persons participating in such an assembly shall be considered to be personally present at the assembly.

Article 300 Voting in Open and by Secret Ballot

(1) Voting at an assembly shall be by secret ballot (which may be in form for computer processing) in all of the following cases:

1) if the company has more than 100 shareholders; 2) when voting for election of removal of a director, an independent auditor of a liquidator; and 3) whenever secret ballot voting is requested by shareholders having at least 20% of the votes present or represented entitled to be cast on the issue to be voted on.

(2) Voting in other cases shall be by show of hands or another open procedure. (3) A ballot shall contain the following:

1) the company’s registered name and the date and time of the assembly; 2) the issues subject to voting as items of the agenda; 3) provision for voting “in favor”, “against” or “abstain” on every issue, 4) for voting for directors, a clear statement of all the candidate’s names and statement of the body (board of directors or supervisory board) voted for.

(4) If the voting is conducted by ballot: 1) a vote on matters other than election of directors shall be counted only if the shareholder marked one and only one of the three options stated in paragraph (4) of this Article; 2) a vote on election or removal of a director without cumulative voting in accordance with Article 312, paragraph (2) of this Law shall be counted only if the shareholder votes for a number of candidates not exceeding the total number of directors to be elected; and 3) a vote on election or removal of a director with cumulative voting shall be counted only if the shareholder’s total number of votes for all candidates does not exceed the total number of votes of the shareholder.

(5) If the ballot contains more than one issue for voting, invalid voting on one shall not adversely affect validity of voting on any other issue.

Article 301

Voting Rights of Specific Types of Shareholders (1) The right to vote shares which are pledged shall be in the pledgor unless the pledgor has given that right to the pledgee by power of attorney. (2)The shares held of record by another company or legal entity, domestic or foreign, may be voted only by a proxy or other legal representative who is authorized to vote on the basis of the entity’s foundation act other constitutive act of that entity. (3) In case of shares held in the name of a deceased person, minor or other person not having legal capacity, the voting may be done through a legal representative as provided by law without transfer of the shares to the representative. (4) In case of shares held by a bankruptcy administrator, liquidator, creditor in bankruptcy proceedings, or similar person, the voting is done by such persons without transferring the shares on condition that power for such voting is contained in an appropriate court decision authorizing such person.

Article 302

Effective Date of Assembly Decisions A decision of an assembly shall be effective as of the time it is made except in following cases:

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1)if the decision itself specifies another effective time (earlier or later) than that time shall be the effective time; or 2) if the law expressly provides that a decision becomes effective upon the date of entering it into the Registry and publication, then the time of registration and publication shall be the effective time.

Article 303 Disqualification to Vote in Certain Cases

(1) A shareholder may not vote at an assembly in the following cases: 1) when relieving that shareholder from an obligation or satisfying the company’s claims against that shareholder; 2) initiate or terminate a lawsuit against that shareholder; or 3) when approving an act or transaction in which that shareholder has a personal conflict of interest with the company.

(2) References in paragraph (1) of this Article to a shareholder include family members of the shareholder and related persons as defined in Article 34. (3) There shall be no limitation on the right of a shareholder to vote when deciding on his election or removal as a member of the board of directors or supervisory board or as a liquidator. (4) The votes of a person who is disqualified under this Article shall also not be counted in determining the quorum for decision making.

Article 304 Record of an Assembly

(1) Every decision of an assembly shall be recorded in minutes of the assembly by a recording clerk. (2) The chairperson of the assembly shall be responsible for assuring that proper minutes are made. (3) The minutes shall be prepared not later than 15 days after the date of the assembly. (4) The minutes shall state: the place and time of the assembly, the agenda, the name of the recording clerk, the chairperson and voting committee members, the quorum, a summary of the discussions and speeches, the votes for, against and abstained on each decision, the manner of voting, the chairperson’s statements on the adoption of each decision and dissenting opinions stated by any shareholders, and a list of decisions made. (5) The list of persons present and evidence of proper convening of the assembly shall also be included in the minutes. (6) The minutes shall be signed by the chairperson of the assembly, two appointed shareholders and the recording clerk. (7) A failure to comply fully with this Article shall not affect the validity of a decisions of the assembly or otherwise valid company action.

Section 6

Invalidity of a Shareholders’ Assembly Decision

Sub-section 1

General Grounds for Invalidity

Article 305 Invalidity Grounds

(1) The competent court may hold that a decision of a shareholders’ assembly is invalid if the decision: 1) was adopted at an assembly which was not convened in accordance with this Law or the company’s Articles of Association or by-laws; 2) was adopted contrary to this Law or the company’s Articles of Association or by-laws; 3) is contrary to law or the company’s Articles of Association or by-laws; or 4) in other cases prescribed by this Law.

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(2) A complaint seeking such a court decision may be brought by a shareholder who voted against the decision at the assembly, or a shareholder who was not been properly invited to the assembly or was prevented from attending the assembly. (3) Such a complaint may also be brought by any member of the board of directors or a financial supervisory body. (4) If the assembly decision is required to be registered in the Registry, the complaint shall not in itself prevent such registration, but the Registry may postpone registration should it find it justified.

Sub-section 2

Special Invalidity Grounds

Article 306 Invalidity of Election of Board Members

(1) Except for cases referred to in Article 305 of this Law , the competent court may hold that the election of a member of the board of directors is invalid if:

1) the board was established contrary to this Law of the company’s Articles of Association of by-laws; 2) the person elected was not nominated in accordance with this Law or the company’s Articles of Association or by-laws; 3) if the shareholders’ assembly elected more members to the board than prescribed by this Law of the company’s Articles of Association or by-laws; or 4) the person elected does not meet qualifications required for his election.

(2) The provisions of paragraph (1) of this Article shall apply mutatis mutandis to appointment or election of members of the management body, or any supervisory board, audit committee or an internal auditor.

Article 307 Invalidity of Decision on Adoption of Annual Financial Reports

(1) Except in cases referred to in Article 305 of this Law, the competent court may hold that a shareholders’ assembly decision on adoption of annual financial reports is invalid if:

1) he contents of the report does not comply with the laws or regulations which exclusively or predominantly protect the interests of the company’s creditors. 2) the auditing of the report was not performed in accordance with law or persons authorized to perform the audit failed to perform it; or 3) legal requirements for entering data regarding the assets and reserves were violated;

(2) The invalidity of the assembly decision on the annual financial reports may result in invalidity of an assembly decision on profit distribution based on the invalid decision and may also result in invalidity of a board of directors’ decision approving the annual financial report.

Sub-section 3

Rules on Invalidity Not Applied

Article 308 Exceptions

Notwithstanding the provisions of Articles 305-307 of this Law, an assembly decision shall not be held invalid if:

1) the defect was minor and the claimant or other persons suffered no significant legal consequences; 2) invalidity would adversely affects the rights of third parties acquired in good faith; or 3) in the case of improper convening of the assembly, the defect was waived or cured in accordance with Article 285 or 286 of this Law.

Sub-section 4

Invalidity Procedure

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Article 309

Charges and the Procedure for Establishing Invalidity (1) A complaint for holding an assembly decision to e invalid shall be brought against the company. (2) The complaint shall be brought within 30 days after the date of learning of the decision and not in any event later than six months (and three months in the case of a listed company) from date of adoption of the decision. If the claimant was present at the meeting when the decision was adopted, this count starts the next day after the meeting was held. If the claimant was not present at the meeting, this count shall start with the first day upon the date he knew of the decision. (3) The company may be represented by a special representative designated by the shareholders’ assembly in accordance with the Articles of Association,. the company’s by-laws or the competent court. (4) The court may, at the company’s request, order the claimant to deposit collateral in case the brought charges cause damage to the company. (5) The court may pass a temporary measure aimed at preventing the implementation of the decision, which is subject to establishing its invalidity, if it deems likely its execution may cause irreparable damage to the company. (6) If more than one proceeding is conducted for establishing the invalidity of the assembly decision, they shall be combined into one. The proceeding for establishing the invalidity of the assembly decision is urgent. (7) The court may set a reasonable deadline for harmonizing the decision which initiated proceedings with this Law, Articles of Association or the by-laws, should it find this necessary and possible; otherwise, as well as in the case of failure to meet set deadline, the court shall continue with the proceedings. (8) All shareholders may be involved in the dispute. (9) The court decision which establishes invalidity of the assembly decision shall be effective in favor and against all shareholders and binding to the relationships among the shareholders and the company, the company and the members of the company bodies. (10) If the charges for establishing the invalidity were rejected due to non existent grounds for proclaiming the decision invalidity, the claimants share joint and several liaibility if the charges were brought in bad faith.. (11) If the decision of the assembly was found invalid, but entered into registry books, the court shall, ex officio, send the decision on invalidity to the registry office, for its registration and publicizing. The entering of the decision is publicized in the same manner the decision on its invalidity was publicized. (12) If the decision of the assembly that was found invalid refers to the amendments of the Articles of Association, an integral text of the Articles of Association shall be sent to the Registry with duly verified signature of the authorized person, with new proposed text taking into consideration the court decision and amendments of the Articles of Association.

Title 12

Board of Directors, Management Body and Financial Supervision

Section 1

General Provisions Concerning the Board of Directors

Article 310 Obligations

(1) Every joint stock company must have a board of directors. (2) The company’s business shall be managed by or under the direction of the board of directors as provided in this Section.

Section 2

Status Issues Concerning the Board of Directors

Article 311

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Number of Directors (1) The number of members of a company’s board of directors shall be stated in the company’s Articles of Association. (2) The board of a closed company the board may have only one member and may have any larger number of members. (3) The board of an open company shall have not less than three members and not more than 15 members.

Article 312

Election of Directors and Cumulative Voting (1) All of the members of a company’s board of directors:

1) shall be elected by the shareholders at each annual shareholders’ assembly; and 2) may be elected by the shareholders at any extraordinary shareholder assembly which has been convened for that purpose.

(2) Candidates for election to the board may be nominated by the incumbent (existing) board or by shareholders as provided in Articles 287. (3) In all elections of directors, every shareholder shall have the right to vote the number of shares held by such shareholder for as many persons as there are directors to be elected. (4) Unless provided otherwise in the Articles of Association, in all open companies, every shareholder shall also have the right to cumulate his votes and give one candidate a number of votes which equals the number of directors to be elected multiplied by the number of the shareholder’s shares, or to distribute such cumulative votes in any proportion he wishes among any number of the candidates for election. (5) The Articles of Association of any closed company may provide for the cumulative voting rights referred to in paragraph (4) of this Article.

Article 313

Independent and Non-Executive Directors (1) In a listed company a majority of the members of the board of directors shall be non-executive directors and, of them, at least two members shall be independent directors. For this purpose, the board of directors and any other person who nominates candidates for the board who would comprise a majority of the board members, must nominate at least two persons who would be independent directors and must nominate a number of non-executive directors who is elected would comprise a majority of the board . (2) For purposes of this Law, “independent director” of a company means, as of any point in time, a director of a company who, or whose family members either separately or together with him or each other, during the two preceding years:

1) was or were not an employee or employees of the company; 2) did not make to or receive from the company payments of more than 30,000 EURO or

equivalent; 3) did not own more than a 30% stock or other ownership interest, directly or indirectly, in an

entity that made to or received from the company payments of more than such amount; 4) did not act as a director or manager of an entity that made to or received from the company

payments of more than such amount; 5) did not own directly or indirectly (including for this purpose ownership by any family member

or related person) stock of the company representing more than 10% of the company’s capital; and

6) was not a director (except an independent director), auditor or liquidator for the company. (3) For purposes of this Law, “non-executive director” means a person who is not a member of the management body or an employee of the company or any related company as defined in Article 368.

Article 314 Term of Office of Directors

(1) The term of office of all directors, including directors elected to fill a vacancy, shall expire at the next annual shareholders’ assembly following their election. (2) As an exception to paragraph (1) of this Article, the term of office of the initial directors shall expire at the first shareholders’ assembly at which directors are elected.

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(3) Despite the expiration of a director’s term, he shall continue to serve until his successor is elected or there is a decrease in the number of directors.

Article 315

Filling of Vacancies (1) A vacancy in a board shall be filled by election at the next shareholders’ assembly at which directors are to be elected, except that a company’s Articles of Association may provide that the board may fill such vacancy until such time. (2) If the number of directors falls below half of the number fixed in the company’s Articles of Association and the board does not fill the vacancies pursuant to authorization in the Articles of Association, the remaining directors shall call a shareholders’ meeting for the purpose of filling the vacancies.

Article 316 Chairman of the Board

(1) A chairman of the board shall be elected by the board from among themselves, by majority of the total number of directors, unless the Articles of Association or by-laws prescribes a different majority. (2) The board may remove and replace the chairman at any time. (3) The chairman of the board may also have the title of president of the company. (4) The chairman of the board may also be the chief executive officer of the company, unless provided otherwise in the Articles of Association or by-laws. (5) The chairman of the board shall convene and preside at meetings of the board and shall be responsible for taking and maintaining minutes of all board meetings. (6) Until a chairman is elected and if he is absent from a meeting, another director chosen by a majority of the directors present shall preside at any meeting.

Section 3

Method of Work and Competence

Article 317 Competence of the Board

The competence of a company’s board of directors shall include the making of decisions on all matters except decisions which are reserved to the shareholders by law or the company’s Articles of Association. Subject to that reservation, the following matters are included within the exclusive competence of the board of directors:

1) reviewing the accuracy of financial information; 2) guiding the company’s development and strategies aand overseeing ite management and administration; 3) determining or approving business plans for the company; 4) convening shareholders’ assemblies and establishing the initial agenda; 5) preparing draft decisions for an assembly and monitoring their implementation; 6) fixing the record date for determining the list of shareholders entitled to participate in an assembly; 7) issuing shares within the limits prescribed by the Articles of Association and this Law; 8) issuing bonds, options to acquire shares and other securities within the limits prescribed by the Articles of Association and this Law; 9) determining the full value of shares and other property in accordance with Article 445 of this Law; 10) appointing the members of the company’s executive body, approving the contracts conditions between them and the company, establishing their remuneration, and deciding on termination of their term of office or their employment on any grounds; 11) determining the amounts, record dates, payment dates and procedures for dividends when the Articles of Association give the board such authority; and 12) deciding other matters which are referred to the competence of the board in the company’s Articles of Association.

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(2) Matters which are included within the exclusive competence of the board of directors may not be transferred to or decided by other persons or bodies of the company, except the shareholders at a shareholders’ assembly.

Article 318

Meetings of the Board (1) The board shall hold at least six regular meetings a year, one of which shall be immediately prior to the annual shareholders’ assembly. (2) Apart from its regular meetings the board may convene extraordinary meetings at the initiative of the chairman, and the chairman shall do so or at the request of any member of the board. If the president fails to convene a meeting at the written request of at least one-third of the directors, the meeting may be convened by those directors.(3) Written notice shall be sent to all the members not later than 8 days prior to the date of an extraordinary meeting except when that is not practicable.. Attendance of a director at any meeting Presence of a director at any meeting shall constitute waiver of any required notice of the meeting except where a director attends for the purpose of objecting to the meeting as not lawfully convened and states that purpose at the meeting. (4) The board may adopt a book of rules for regulating its meetings to the extent that that is not done in the company’s Articles of Association or by-laws.

Article 319 Meeting by Conference Telephone and Actions Without a Meeting

(1) Unless specifically prohibited by a company’s Articles of Association, a meeting of a company’s board may be held by conference telephone or other audio or visual communications equipment in all participants can hear and talk to each other. The persons attending a meeting in this way shall be considered to be present at the meeting. (2) Unless a company’s Articles of Association or by-laws require that action by the board must be taken at a meeting, any action which may be taken at a meeting may be taken without a meeting if a consent in writing, stating the action so taken, is signed by all of the directors entitled to vote on such matter. The action shall come into effect when the consent is signed by all the directors. (3) Decisions made as described in paragraph (1) of paragraph (2) of this Article shall be entered into the board’s book of decisions.

Article 320 Committees of the Board

(1) A board may create one or more committees, each consisting of two or more directors, to review, study, make recommendations on, or take other action on matters which are within the competence of the board. A majority of any committee shall constitute a quorum and a majority of a quorum shall be necessary for any committee recommendation or other action. All decisions of a committee shall be subject to approval of the entire board. (2) The board of every listed company shall establish at least the following two committees with the following responsibilities:

1) a nominating committee, which shall identify persons qualified to become board of directors or management body members, and make recommendations to the whole board of directors including recommendations of candidates for board membership to be included by the board of directors on the agenda for the next annual shareholders’ assembly; 2) a remuneration committee, which shall review the company’s remuneration policies for board of directors, management body members and auditor, make recommendations regarding remuneration policies and amounts for specific persons to the whole board, taking account of total remuneration including salaries, fees, expenses and employee benefits.

(3) Provisions for election, number of members, removal, term, meeting procedures and other matters shall be determined by the board or the company’s by-laws. (3) All decisions of a committee of a board of directors shall be subject to approval by the entire board.

Article 321

Corporate Governance Guidelines

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(1) The board of a listed company may establish or adopt written corporate governance guidelines covering matters such as standards for qualification and independence of a director, directors’ responsibilities including meeting attendance, diligence in reviewing materials, and rules for disclosure and review of potential conflicts of interest with the company, director compensation policy, succession planning for both directors and management body members, and other corporate governance matters deemed appropriate. (2) The company shall publish such guidelines on its website and make them available in print to any shareholder who requests it. (3) At each annual shareholders’ assembly the company’s board of directors may report to the assembly on the company’s compliance with its guidelines and explain the extent if any to which it has varied them or believes that any noncompliance was justified.

Section 4

Decision-Making

Article 322

Quorum and Vote Required for Decisions (1) The quorum for decision-making and transaction of business by a company’s board shall be a majority of total number of directors fixed in the company’s Articles of Association, unless the Articles of Association or by-laws requires a greater number. (2) The affirmative vote of a majority of the directors present at a meeting at which a quorum is present shall be the act and decision of the board, unless the Articles of Association or by-laws requires a greater number of directors. (3) A decision of the board shall be effective at the dime it is made. (4) If the votes of the board members are equally divided the chairman of the board shall have a tie-breaking vote, unless provided otherwise in the company’s Articles of Association or by-laws.

Article 323 Disqualification to Vote in Certain Cases

The provisions of Article 303 of this Law on disqualification of a shareholders’ right to vote at an assembly shall apply mutatis mutandis to voting by directors at a board meeting.

Article 324 Records of Meetings

(1) Minutes of the meeting shall be taken at every meeting of the board and the minutes of each meeting shall be submitted to the board for its review and approval at the next meeting. The minutes shall be signed by the chairman of the board or other person who presided at the meeting and any recording clerk who took them. (2) The minutes of a meeting shall be prepared no later than 10 days following the meeting. (3) The minutes shall include the time and place of the meeting, the names of those attending, the agenda, the issues that were subject to voting, the voting results including the names of those who voted in favor, against or who abstained, and the decisions adopted at the meeting. (4) Failure to act in accordance with the provisions of this Article shall not affect otherwise valid actions and decisions by the board of directors.

Section 5

Management Body of a Company

Article 325 Definition

(1) A company’s board of directors may elect a management body which shall report to and be subject to the direction of the board of directors.

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(2) The management body may consist of only one member who may be called the managing director, or of more than one member who may be collectively called managing directors. (3) A person may be both a member of the board of directors and the management body, but in an open company no more than half of the board of directors d members may be management body members. (4) The management body may be authorized by the company’s Articles of Association or shareholders’ assembly to delegate some or all of its authority to a to another company or to an individual entrepreneur pursuant to contract with that company or person. (5) The competence of the management body shall include implementation of decisions of the board of directors and all matters associated with management and operation of current activities of the company except matters within the exclusive competence of the board of directors or the shareholders’ assembly. (6) Members of the management body shall be obligated to observe all limitations on their authority prescribed by this Law, the Articles of Association, or any decision of the shareholders’ assembly or the board of directors prescribing such limitations.

Article 326 President of the Management Body and Representation of the Company

(1) A president of a company’s management body shall be elected by the company’s board of directors. (2) The board of directors may designate the president as the general manager or chief executive officer of the company (CEO) and may also prescribe his duties in detail in the company’s by-laws or in a separate resolution of the board . (3) The president of the management body shall convene and preside at meetings of the management body, shall organizes its work, and cause a record of such meetings to be prepared. (4) The president shall have authority to represent the company, after registration and publication of the registration, generally without any specific power of attorney. This shall apply also to any president of a management body if so specidied in the Articles of Association or by-laws of the company. If more than one person represents the company they may act independently unless otherwise specified in the Articles of Association and filed in the Registry and published in accordance with this Law and the Law on Registration. (5) A company’s Articles of Association or by-laws, or a decision of the board of directors, may prescribe specific functions, authorities, duties and titles for other members of the management body, and may prescribe specific procedures for convening and holding meetings and making decisions of the management body. (6) The entire management body and its members shall act in accordance with the company’s Articles of Association, by-laws, and decisions of the board of directors which are not inconsistent with the Articles of Association or by-laws. (7) Any member of the management body may be removed by the board of directors at any time, with or without specific cause, whenever in the board’s judgment the best interests of the company would be served by such removal, but such removal shall not prejudice contract rights, if any, of the person so removed.

Section 6

Special Duties by the Board of Directors and the Management

Article 327

Reporting by the Board to the Shareholders’ Assembly and by the Management Body to the Board (1) The board of directors shall report to the shareholders on the following matters:

1) not less than once each year, on the intended business policy and other fundamental matters regarding the future conduct of the company’s business, including any deviations from previously-set goals and the reasons for such deviations; 2) at each annual shareholders’ assembly, on the profitability of the company; 3) not less than every six months, on the state of the business, in particular revenues, and the condition of the company; and 4) promptly, on business transactions that may have a material impact on the company’s profitability and solvency, so that the shareholders may be aware of such matters.

(2) Such reports shall include the above items with respect to any controlled companies.

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(3) The shareholders’ assembly may request the board to report on other issues significant for the company’s operations and its status. (4) The reports of the board to the shareholders shall be in writing and shall be accurate and complete. (5) The board of directors may at any time ask the management body to report on business operations which may significantly influence the company’s status, business relations with other companies, and any other matter referred to above in this Article. Any director may request such report which shall be given, however, to the board of directors as a body. (6) The members of the management body of the company shall have a duty to keep the board of directors regularly and fully informed regarding the matters referred to above in this Article.

Section 7

Remuneration of Directors and Management Body Members

Article 328 Remuneration Principles

(1) A member of the board of directors or the management body may have regular employment with the company (except in the case of an independent and a non-executive director) or may perform his duties pursuant to a separately concluded contract with the company which states his remuneration and other terms of service. (2) The remuneration of and contract with a member of the board of directors must be approved by the shareholders’ assembly. The remuneration of and any contract with a member of the management body must be approved by the board of directors or the shareholders assembly. (3) In the case of an open company the remuneration paid to members of the board of directors may be included in the financial reports submitted to the annual shareholders’ assembly and may be published in accordance with the Law on Securities.

Section 8

Resignation, Removal and Certain Liabilities of a Director or Management Body Member

Sub-section 1

Status

Article 329 Resignation of a Director

(1) A member of the board of directors or management body may resign at any time by giving written notice to the board of directors or the chairman. (2) The resignation becomes effective when the notice is given unless the notice specifies a future date. (3) A resignation terminates the resigning person’s membership on the board. Such termination does not require a separate company decision. (4) A resignation may be revoked only with the consent of the board of directors. (5) The provisions of paragraphs (1) - (4) of this Article shall also apply to resignation by a member of the management body.

Article 330

Removal of a Director (1) A member of the board of directors may be removed by a shareholders’ assembly decision at any time, with or without a stated reason, if the shareholders believe that that is in the best interest of the company. (2) Any such removal shall be effective if approved by the vote of at least a majority of the votes of shares entitled to vote on the election of directors at the assembly, except that:

1) no director may be removed at an assembly unless the notice of the assembly given in accordance with Article 284, paragraph (3) of this Law states that a purpose of the assembly was to vote on the removal of such director at the assembly; and

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2) if the company has cumulative voting for directors and less than the entire board is to be removed, no director may be removed if the votes cast against his removal would be sufficient to elect him if then cumulatively voted at an election of the entire board of directors.

(3) The removal of a director shall not, in itself, prejudice any right to compensation upon removal which the director may have under a contract with the company. However, the election or status of a person as a director shall not, in itself, create any such rights. (4) A member of the management body may be removed by decision of the board of directors at any time, with or without a stated reason, if the board believes that that is in the best interest of the company. Paragraph (3) of this Article shall apply mutatis mutandis in the case of any such removal.

Sub-section 2

Personal Liability of Directors in Certain Cases

Article 331 Personal Liability Cases

(1) A member of the board of directors who is present at a meeting of the board at which action is taken shall be deemed to have agreed to such action unless he has stated his disagreement and his disagreement has been entered into the minutes of the meeting or sent by him in writing immediately after the meeting to the person who presided or kept minutes of the meeting. A person who is absent from the meeting shall be deemed to have agreed to such action unless he files his disagreement in the same manner immediately after he has notice of the action. (2) Members of the board and management body shall, in particular, be liable to the company for damages resulting from breach of their obligations to the company if they have:

1) returned capital to a shareholder in violation of this Law; 2) paid interest or dividends to a shareholder in violation of this Law; 3) cause the company to subscribe to, pledge, acquire or cancel its own shares in violation of this Law; 4) approved a loan or credit in violation of this Law; 5) made payments during liquidation in violation of this Law 6) caused the company after its termination to conduct business other than business which is necessary for liquidation and winding up of the company’s business and assets; or 7) violated their duties to the company stated in Articles 31-33 and 36-37 of this Law.

Title 13

Supervisory Bodies

Section 1

Principles of Status and Election

Article 332

Supervisory Board, Internal Auditor or Audit Committee (1) The Articles of Association or by-laws of an open company may,, and of a listed company must, provide that the company shall have a supervisory board, an internal auditor or an audit committee. (2) As an exception to paragraph (1) of this Article, a company must have a supervisory board if a law other than this Law requires that it have a supervisory board because of the activities which it conducts. (3) The Articles of Association or by-laws of a closed company may provide that the company shall have an internal auditor or an audit committee with the duties and competence stated in Article 334 of this Law. (4) A supervisory board or an audit committee shall have at least three members and its total number of members shall be odd. An internal auditor shall be an individual person.

Article 333 Membership,

Election and Removal of Supervisory Board

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(1) A member of a supervisory board may not be a member of the company’s board of directors, but all of the members of a supervisory board must be persons who qualify under the definition of “independent director” in Article 313. (2) The members and the chairman of a supervisory board shall be elected by the shareholders’ assembly, except that the initial members may be appointed in the initial Articles of Association or by a decision of the founders of the company. As an exception to the foregoing, members of a supervisory board may be elected by and may include employees of the company if a law other than this Law so requires. (3) The procedures for election and removal of members of a supervisory board shall be as provided in Articles 312, paragraphs (4) and (5) and 330 of this Law, which shall apply mutatis mutandis. For that purpose the terms “director” and “board of directors” when used in those articles shall mean member of the supervisory board and supervisory board.

Article 334 Membership, Election and Removal of Internal Auditor and Audit Committee

(1) An internal auditor and the members of an audit committee shall be elected by the company’s board of directors from among its members who are independent directors if there are such persons. If there are not, the internal auditor and thye members of an audit committee shall be elected by the shareholders’asssembly in accordance with Article 313, paragraph (2) of this Law. The initial internal auditor or audit committee members may be appointed in the initial Articles of Association or by a decision of the founders of the company. Such persons may be removed at any time by the same persons who can elect them at that time, with or without a stated reason. (2) Any such removal shall not, in itself, prejudice any right to compensation which the person may have under a contract with the company, but his status as an internal auditor or member of the audit committee shall not in itself create any such rights.

Article 335 Competence and Method of Work

(1) The supervisory board, internal auditor or audit committee shall report to the shareholders’ assembly on the following:

1) the accounting, reporting and financial practices of the company and its related companies; 2) the company’s compliance with legal and regulatory requirements; and 3) the qualifications, independence and performance of the company’s outside auditor.

(2) In performing its functions the supervisory board, internal auditor or audit committee shall review and discuss with the board of directors, and also with the company’s outside auditor when thought appropriate, the matters referred to in paragraph (1) of this Article and specifically the following:

1) the selection, compensation and oversight of the work of the outside auditor; 2) the adequacy and completeness of the annual and other financial statements of the company and the basis for proposals for distribution of profit and other distributions to shareholders; 3) the adequacy and completeness of the company’s disclosure of financial and other information to the shareholders; 4) the adequacy of the company’s policies and procedures for compliance with this Law including but not limited to the provisions of this law relating to financial matters and conflict of interest transactions; 5) the adequacy of the company’s policies and procedures for compliance with other laws including but not limited to the Law on Registration, the Law on Securities Markets and the Law on Accounting; and 6) procedures for handling any complaints from shareholders, governmental bodies or other persons concerning the foregoing.

(3) The supervisory board, internal auditor or audit committee shall present a report to the shareholders on the foregoing at each annual shareholders’ assembly and at any extraordinary shareholders’ assembly when it considers a report to be appropriate or necessary. (4) In carrying out their duties the supervisory board, internal auditor or audit committee may inspect all documents of the company, request statements and explanations of members of the board of directors or employees and inspect the state of the company’s assets.

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(5) They shall also have the authority to hire legal or other experts to assist in carrying out their duties and to pay reasonable compensation to such experts as determined by the supervisory board, internal auditor or audit committee. (6) The procedures for meeting and other action of such bodies shall be as stated in Articles 318-319, Articles 322 and 324 of this Law, which shall apply to such bodies mutatis mutandis. (7) More detailed regulations on the competence of such bodies may be determined in the Law on Accounting.

Section 2

Independent Audit

Article 336 Auditor

(1) A joint stock company shall have an auditor in accordance with the Law on Accounting, with supervisory authorizations as determined by that Law (independent external audit). (2) The auditor of a joint stock company shall be notified and invited at the same time as the company’s shareholders about a shareholders assembly or about a decision in writing without a meeting so that he can participate in the decision-making procedure in accordance with the law.

Section 3

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Fiduciary Agent-Expert

Article 337

Appointment of Fiduciary Agent - Expert (1) If requested by shareholders holding shares represecting at least 20% of a company’s basic capital, the shareholders’ assembly may appoint a fiduciary expert to conduct an independent audit of the company’s annual financial reports for the previous three years and related business and financial records and books of the company. If such audit is related to assessment of work of members of the board of directors or the supervisory board, or if it is is related to instigation of litigation in court involving a dispute between the company and the requesting shareholders, no member of those boards may participate in voting on the decision on appointment of such auditing expert. (2) If the shareholders’ assembly, after the request of shareholders referred to in paragraph (1) of this Article, does not decide to appoint a fiduciary expert, the competent court, upon motion filed by such shareholders may, in a non-contentious proceeding, appoint one or more fiduciary experts if the court finds it likely that violations of the law or the the company's Articles of Association have occurred. (3) The motion referred to in paragraph (2) of this Article must be submitted to the court within 15 days after the shareholders’ assembly meeting at which the proposal to appoint a fiduciary expert was rejected. (4) Prior to appointment of the fiduciary expert the court shall gather statements on the matter from the members of the board of directors and the supervisory board. (5) The court may demand from the shareholders who submitted the motion to pledge collateral which the court finds reasonably adequate prior to appointment of a fiduciary expert. (6) Only a person who would meets the requirements to qualify as an independent external auditor for the company and who actually provides such services may be appointed as the fiduciary expert. (7) The mandate, rights, obligations and responsibilities as well as other issues related to status of the fiduciary expert shall be stated in the Articles of Association or by-laws of the company or in the the decision on appointment of the expert. (8) During the auditconducted by the fiduciary expert, shareholders of the company who made the request referred to in paragraph (1) of this Article may not transfer their shares without company’s consent, which shall be noted in the Registry.

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Article 338 Authorization of Fiduciary Agent – Expert

(1) A fiduciary agent – expert shall have the right to inspect the financial and business books and documents of the company and to demand information and statements from members of the board of directors and the supervisory board as well as from employees of the company in order to establish the state of business of the company. All persons the fiduciary expert asks to give information and/or statements shall give them truthfully and without delay. (2) The amount of the fee to be paid to the fiduciary expert appointed by the shareholders’ assembly shall be determined by the assembly, while the amount of fee for the fiduciary expert appointed by the court shall be determined by the court, and the expert may not receive any other fee or remuneration for the work from any party other than the court of law.

Article 339

Report of Fiduciary Agent – Expert (1) A fiduciary agent-expert shall submit his report without delay to the board of directors and the supervisory board. Thereport shall include a statement of whether the expert’s requests were met during the audit and whether the company’s audited annual financial statements state a true and accurate picture of financial state of the company. (2) The shareholders who filed the motion for appointment of the fiduciary agent - expert by the court of law shall have the right to inspect the audit report and the attached documentation prepared by the expert at the company’s registered office. (3) The board of directors and the supervisory board of the company shall, at the next shareholders’ assembly, submit the report prepared by the expert and ask the assembly to make any appropriate decisions aftger considering the report. If the report shows that serious violations of the law or the Articles of Association occurred, an extraordinary shareholders’ assembly shall be convened without delay. Based upon the expert’s findings a court may also, at request of the shareholders referred to in paragraphs (1), point (3) of Article 282 of this Law, order to the company to convene the shareholders’ assembly within a period of time determined by the court. (4) At an assembly convened to consider findings of the fiduciary expert, the board oc directors and the supervisory board shall make statements on any irregularities or alleged irregularities and state any measures they propose need to be taken. The supervisory board shall also give its opinion on the issue of right of the company to be reimbursed for any damages sustained. (5) If no agreement can be reached as to who shall bear the cost of this special audit, the competent court of law shall decide, based upon its own assessment taking into consideration the results of the audit, who, and to what extent, shall bear the cost. (6) An audit of fiduciary expert within the meaning of provision of Article 340 of this Law shall be rendered unjustified if the validity and accuracy of financial reports/statements have been confirmed in their entirety, i.e. if the business books are proved to have been kept in orderly manner. (7) If the audit prepared by the fiduciary expert has established that the motion for auditing was not justified, shareholders of the company who, in bad faith demanded the special audit may be held liable to the company for damages suffered by the company due to their demand.

Title 14

Corporate Secretary

Article 340

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Company Secretary (1) An open joint stock company shall have a secretary elected by the board of directors. (2) The term of office of the secretary shall be stipulated in the by-laws. (3) Salary and other material rights of the secretary shall be determined by an agreement between the secretary and the board of directors, upon the proposal of the chairman. (4) The secretary shall be responsible for keeping the books of the shareholders, the Registry of the minutes from the shareholders’ assembly, chairing the meetings of the board of directors and supervisory board and keeping documents as determined by this Law and the by-laws of the joint stock company, but not the financial reports. (5) The secretary shall be authorized to implement the decisions by the shareholders’ assembly, the board of directors and any supervisory body (6) The secretary shall be responsible for preparing the meetings and keeping the minutes at the shareholders’ assembly, the board of directors and supervisory board.

Title 15

Amendments to the Articles of Association

Article 341

Amendment by the Board of Directors (1) A company’s Articles of Association may be amended by the company’s board of directors without shareholders’ assembly decision:

1) if the amendment is to change the company’s registered office or to make other changes in form which do not affect the rights of any shareholder; or 2) if the amendment is to state an increase in the number of issued shares and capital to reflect the issuance of shares by the board of directors pursuant to authority granted to it referred to in Article 203, paragraph (4) of this Law.

(2) In all other cases the Articles of Association may be amended only as stated below in this Chapter.

Article 342 Amendment by the Board of Directors and the Shareholders’ Assembly

A company’s Articles of Association may be amended by the board of directors and the shareholders as follows:

1) the board of directors shall adopt a decision stating the proposed amendment and directing that it be submitted to a shareholder assembly, which may be either an annual or extraordinary assembly; 2) written notice of the proposed amendment, including a copy of the proposed amendment, a statement that it will be included on the assembly agenda, and if appropriate a statement that shareholders will be entitled to dissent and appraisal rights as required by Articles 444-446;; and 3) at the assembly the proposed amendment shall be adopted upon receiving the affirmative vote of a qualified majority of the votes of the shares entitled to vote on the amendment, except that if any type or class of shares is entitled to group voting on the amendment, the proposed amendment shall be adopted upon receiving the affirmative votes of a qualified majority of the votes of the shares of each group entitled to group voting on the amendment and of the total number of votes of the shares entitled to vote on the amendment.

Article 343

Separate Group Voting by a Type or Class of Shares The holders of any type or class of shares shall be entitled to vote as a group on a proposed change in the Articles of Association if the Articles of Association so provides or if the change would:

1)increase or decrease the total number of authorized shares of such group; 2) change any of the rights or preferences of the shares of such group; 3)create a right of the holders of any other shares to exchange or convert their shares into shares of the type or class held by such group;

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4)change the shares held by such group into a different number of shares or into shares of another type or class; 5) create a new type or class of shares having rights or preferences superior or substantially equal to those of such group, or increase the rights and preferences of any type or class of stock having rights and references substantially equal to or superior to those of such group, or increase the rights and preferences of any type or class of stock having rights and preferences subordinate to those of such group if such increase would then make them substantially equal or superior to those of such group, 6) limit or deny the existing preemptive rights of the shares of such group, 7) cancel or otherwise affect accumulated dividends on the shares of such group, 8) limit or deny the voting rights of such group, or 9) otherwise change the rights or preferences of the shares held by such group so as to affect them adversely.

Article 344

Registration and Effective Time of an Amendment (1) Upon adoption of an amendment to a company’s Articles of Association in accordance with this Chapter, the company shall file the amendment with the Registry for entry into the Registry in accordance with the Law on Registration. (2) The amendment shall be and become effective upon its entry into the Trade Registry in accordance with the Law on Registration.

Title 16


Article 345

Retention of Company Documents and Information (1) A joint stock company must at all times keep and maintain the following:

1) its Articles of Association including all amendments thereto; 2) its by-laws including all amendments thereto; 3) the decision on its registration;

4) internal documents approved by its shareholders’ assembly, board of directors and supervisory board if it has a supervisory board;

5) foundation documents of every branch and representative office; 6) documents proving the ownership and other rights of the company over its assets; 7) minutes and decisions of all shareholders’ assemblies, board of directors’ meetings and

supervisory board meetings; 8) orders and decisions of its executive body; 9) minutes of any special auditors’ commission and their orders and conclusions; 10) annual financial reports, reports on business operations and auditors. reports; 11) issuing a prospectus for shares and other securities; 12) accounting files and accounts; 13) a list of related companies with share or other ownership interests in those companies; 14) the book of shares; 15) a list of full names and addresses of all members of the board of directors and all persons

authorized to represent the company, with information as to whether they represent the company individually or jointly;

16) a list of full names and addresses of all members of the supervisory board if the company has one;

17) a list of all transfers of shares including pledges and any other transfers to a person by which he does not become a shareholder;

18) a list of contracts between the company and m embers of the board of directors and any supervisory board; and

19) any annulment of the company’s registration. (2) A company must keep the foregoing at its registered office or another place known to and accessible to all of the company’s shareholders.

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(3) A company shall keep its Articles of Association and by-laws permanently. It shall keep the other documents specified in this Article for at least five years, and shall then deliver them to the archives in accordance with applicable laws and regulations.

Article 346 Access to Records and Information

(1) A company shall make the documents and information referred to in Article 345available to any shareholder, and any previous shareholder with respect to the period when he was a shareholder, for inspection and copying during regular business hours of the company. (2) A company may take any necessary steps to require a person requesting information to identify himself and his status as a shareholder or former shareholder before the information is provided. (3) A company may also require any such person to pay the costs of any copying.

Article 347 Access by Court Order

(1) If a company refuses to provide information required by Article 346 to be provided for a period exceeding five days after receiving a proper request in writing therefor, the person making the request may request the competent court in a non-contentious proceeding to order the company to provide the information. (2) The court shall make its decision on such request within three days after its receipt of the request. (3) A person receiving non-public information from a accompany shall be obligated to maintain its confidentiality and not publish it in a way which would cause damage to the company unless he has a legal right to do so. Such person shall be liable to the company for any damage wrongfully caused to it by any such disclosure or publication.

Title 17

Dissolution

Article 348

Events Causing Dissolution A joint stock company shall dissolve upon the occurrence of any of the following events: 1) expiration of the company’s term stated in the Articles of Association; 2) decision to dissolve of its shareholders’ assembly by qualified majority vote; 3) a final decision of the competent court that the company’s registration was null and void and ordering deletion of the company from the Registry ex officio; 4) a decision of the bankruptcy court on opening and concluding bankruptcy proceedings, due to inability to cover the costs of the bankruptcy proceedings from the company’s bankruptcy estate; 5) conditions for conducting bankruptcy proceedings; 6) a final decision of the competent court under Article 47 that the company is dissolved; or 7) an event specified in the Articles of Association as causing dissolution of the company.

Article 349

Dissolution and Other Remedies by a Court on Motion of Shareholders (1) In an action by shareholders who represent 20% or more of the capital of a company, the competent court may order the dissolution of the company or may order the other remedies stated in paragraphs (2) and (3) of this Article if it is established that:

1) the directors are deadlocked in the management of the company, whether because of even division in the number of directors or for other reasons; the shareholders are unable to break the deadlock; and the company’s business can no longer be conducted to the shareholders’ general advantage; 2) the shareholders are deadlocked in voting power and have failed for a period that includes at least two annual assembly dates to elect successors to directors whose terms have expired; and the company’s business can no longer be conducted to the shareholders’ general advantage;

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3) the directors or other persons in control of the company have acted illegally, oppressively or fraudulently toward the requesting shareholders; or 4) the company’s assets are being wasted or misapplied.

(2) In such a case the court may order that the company be dissolved immediately or, if it finds that the grounds stated above are curable, it may set a time period not longer than one year for cure and order that if the grounds are not cured within that time the company will be dissolved. If the court orders dissolution it shall also order that the company be liquidated under this Law, and the court shall have the power appoint the liquidators. (3) As an alternative to dissolution the court shall also have the power to order one or more of the following remedies:

1) the removal from office of any director or management body member; 2) the appointment of a person as a director or management body member; 3) the appointment of a temporary custodian to manage the business of the company, to serve for a term and under the conditions prescribed by the court; 4) an audit or accounting of the company’s funds or other property; 5) the payment of dividends; 6) the purchase by the company of the complaining shareholders’ shares for their fair value determined by the court with the assistance of independent appraisers; or 7) the award of damages to any party suffering damages.

(4) The action referred to in this Article shall be brought against the company. It shall not be necessary to make shareholders or directors parties to the action unless damages or other remedies are sought against them personally. The court shall have power to order that shareholders or directors be made parties.

PART THREE

Chapter 6

LIQUIDATION OF A COMPANY

Title 1

General Provisions and Initiating Proceedings

Article 350

General Provision Concerning Liquidation A company may be liquidated as provided in this Chapter when it has sufficient assets to cover all

of its liabilities.

Article 351 Decision to Liquidate

(1) The liquidation shall be authorized by the company's partners, members or shareholders as follows: 1) in the case of a general partnership, by unanimous decision of the partners, unless the Articles of Association or partnership agreement specifies a lower vote; 2) in the case of a limited partnership, by unanimous decision of the general and limited partners, unless the Articles of Association or limited partnership agreement specifies a lower vote; 3) in the case of a limited liability company, by decision as provided in Article 144, paragraph (2) of this Law; and 4) in the case of a joint stock company, by decision of a qualified majority as provided in Article 296, paragraph (2) of this Law .

(2) In all cases, the provisions of this Law and the company's Articles of Assocation, partnership agreement, company agreement or by-laws regarding notice and voting proecdures shall apply with respect to the decision to liquidate.

Article 352

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Entry into the Registry and Publication A company's decision liquidate shall be entered into the Registry and published in accordance

with the Law on Registration.

Title 2

Liquidation and Creditors

Article 353 Individual Notice to Known Creditors

(1) A company in liquidation may dispose of the known claims against it by following the procedure stated in this Article.

(2) The company shall deliver written notice to its known creditors and other claimants enclosing a copy of this Article of this Law and a copy of the entry into the Registry of its decision to liquidate. The notice must also:

1) provide a mailing address where a claim by the claimant must be sent; 2) state the deadline, which must not be earlier than four months from the date of delivery of the written notice, by which the company in liquidation must receive the claim; and 3) state that the claim will be barred under this Article if the claim is not received by the company at that address by that deadline.

(3) A claim against the company is barred if the claimant received notice under paragraph (2) of this Article and did not deliver the claim to the company in liquidation by the deadline, or if a claimant whose claim was rejected by the company in liquidation does not begin litigation in court to enforce the claim within 90 days after the rejection was received by the claimant. (4) For purposes of this Article, a claim does not include a claim based on an event occurring after the date of the registration of the company’s decision to liquidate as provided in Article 352 of this Law.

Article 354

Published Notice to All Creditors (1) A company in liquidation may dispose of all claims including unknown claims against it by following the procedure stated in this Article. (2) The company shall publish notice of its dissolution in accordance with Article 352 of this Law. The notice:

1) must be published at least three times at intervals not less than 15 nor more than 30 days apart; 2) must refer to this Article of this Law; 3) must provide a mailing address where a claim by any creditor or other claimant must be sent; and 4) must state that a claim against the company will be barred if the claimant does not begin litigation in court to enforce the claim within 60 days after the last date of publication of the notice.

(3) If a liquidating company publishes in accordance with paragraph (1) of this Article, the claim of each of the following claimants will be barred unless the claimant begins litigation in court to enforce the claim against the dissolved company within 90 days after the last date of publication of the notice:

1) a claimant who did not receive written notice under Article 353; 2) a claimant whose claim was delivered to the company in accordance with Article 353 but was not paid, rejected or otherwise acted on by the company; and 3) a claimant whose claim is based on an event occurring after the date stated in paragraph (4) of Article 353 of this Law.

Title 3

Status of Company and Liquidators

Article 355

Activities of a Company During Liquidation

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(1) During liquidation a company shall continue in existence as before but it may not conduct any business except business which is appropriate for liquidation, such as assembling and selling its assets, paying creditors, and other activities necessary for liquidation. New business activities may be conducted only if appropirate for the liquidation. (2) During liquidation a company shall not pay dividends or make other distributions to partners, members or shareholders prior to the payment of or providing for claims of creditors and other claimants.

Article 356

The Liquidators (1) During liquidation a company's activities and business shall be conducted by the same company persons exercising the same authority as they had before, unless the company or the competent court appoints another person or persons to conduct such activities and business. (2) The person or persons who have such authority during liquidation are called the “liquidators” in this Law. (3) On request of any partners, members or shareholders holding interests or shares representing 10% or more of a company's capital, the competent court may for justified resons appoint a liquidator to replace or to act together with the persons referred to in paragraph (1) of this Article.

Article 357 Removal of Liquidators

Any liquidator may be removed in the same manner in which he was appointed.

Article 358 Entry of the Appointment and Removal of the Liquidators into the Registry

The appointment or removal of a liquidator shall be entered into the Registry and published in accordance with the Law on Registration.

Article 359

Activities of the Liquidators (1) The liquidators of a company shall close the operations of a company, collect claims, pay liabilities and liquidate the company’s assets. (2) Within their competences as referred to in this Chapter the liquidators of a company shall be in charge of operations of the company. (3) The liquidators shall represent a company in liquidation with the authority stated in Article 25.

Title 4

Liquidation Balance Sheets

Article 360

Liquidation Balance Sheet – Financial Statement (1) The liquidators of a company shall prepare a balance sheet not later than three months after the date of initiation of liquidation proceedings (the “initial liquidation balance sheet”). Such balance sheet shall be delivered by the liquidators to the partners, members or shareholders' assembly of the company for approval. The assets and liabilities of the company, measures necessary to carry out liquidation, and the period of time needed for the liquidation procedure to be completed, shall be stated in the balance sheet. (2) Not later than three months after expiration of any business year, if the liquidation lasts for more than one year, the liquidators shall supply a temporary report on their activities, with the explanation why liquidation has continued without being completed, and a financial report. (3) All the assets of the company shall be shown in the balance sheet with their sale or estimated sale value.

Article 361

Termination of Liquidation and Commencement of Bankruptcy (1) If the liquidators establish that the assets of a company are not sufficient to cover all the claims of creditors they shall terminate the liquidation procedure and initiate bankruptcy proceedings.

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(2) If a liquidation is terminated the liquidators shall enter the termination into the Registry and publish it in accordance with the Law on Registration.

Article 362 Report Following Settlement with Creditors

(1) After settlement of a company's debts, the liquidators shall prepare a report on the completed liquidation with a final liquidation balance sheet and proposal for distribution of the company’s assets. (2) The final liquidation balance sheet shall include a report of the sources of income and its disposition, a list of assets disposed of and income generated, a statement of whether there are other open issues and proposed solutions for any such issues, the amount of liquidation costs, and the liquidator’s fee. (3) The report and the final liquidation balance sheet shall be adopted by the partners, members or shareholders of the company, unless provided otherwise in a company decision or in a decision of the competent court.

Title 5

Payments to Company Owners and Completion of Liquidation

Article 363 Distribution to Partners, Members or Shareholders

(1) The assets of a company which remain after settlement or provision for settlement of its liabilities to creditors and other claimants shall be distributed by the liquidators among the partners, members' meeting or shareholders' assembly of the company. (2) Unless provided otherwise in a company's Articles of Association, partnership agreement or company agreement, or in a decision of the competent court, the distribution shall be in the following order of priority:

1) first, to payment of any partners, members or holders of preference stocks who have preferential rights to distributions on liquidation as stated in the company's Articles of Association, partnership agreement or company agreement; and 2) second, to partners (in case of a general or limited partnership), members (in the case of a limited liability company) in proportion to their paid-in contributions to the company, and holders of ordinary shares (in the case of a joint stock company) in proportion to the number os shares held by them.

(3) Limited partners of a limited partnership, members of a limited liability company, and shareholders of a joint stock company who received distributions in good faith after the company has complied fully with the procedures stated in Articles 354 and/or 355 as applicable shall not be liable to return what they received in order to pay creditors. (4) If there is a dispute regarding distribution of company’s assets among partners, members of shareholders of a company, the liquidators may postpone distribution until final settlement of the dispute, unless otherwise ordered by the competent court.

Article 364 Remuneration of Liquidators

(1) Liquidators shall be entitled to be reimbursed for the costs they reasonably incur and to be paid a reasonable fee for their work. The level of the costs and fees shall be approved or determined by the partners, members or shareholders of the company and may be determined by a competent court in the case of dispute. (2) The liquidators shall be creditors of the company with respect to such reimbursement and fees. (3) Such costs and fees may be paid during the liquidation, prior to settling the claims of creditors, if it is evident that such payment will not affect the meeting of the company’s obligations to other creditors.

Article 365

Finalization of the Liquidation (1) When the liquidation of a company is completed, and upon the approval by the partners, members’ meeting or shareholders’ assembly of the financial report prepared as of the date of the completion of the liquidation and the report on the conduct of liquidation, the liquidators shall without delay submit such

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reports to the company and the Registry, together with a request for deleting the company from the Registry in accordance with the Law on Registration. (2) If after completion of the liquidation a meeting of the company’s partners, members or shareholders is not held for the approval referred to in paragraph (1) of this Article due to lack of quorum, the liquidators shall bring the proceedings to end for purposes of paragraph (1) of this Article without the approval of the financial report and of the report on the conduct of the liquidation by the partners, members’ meeting or shareholders’ assembly. (3) Business records and documents of the company that was liquidated shall be deposited with the person designated for that purpose in the decision of the company and, if no such person is designated, the depositary shall be appointed by the Registry. (4) Business books and documents shall be kept in accordance with regulations concerning the registration and archives material. (5) The date as to where the business books and documentation of the partnership are held shall be entered in the Registry in accordance with the Law on Registration. (6) With the approval of the Registry, all persons having a legal interest, and all persons who make partners, members or shareholders of the company during the liquidation, may inspect such books and documents. (7) If it later becomes necessary to carry out further measures in the company's liquidation, the competent court may at the proposal of a person having a legal interest therein reappoint the liquidators or appoint new liquidators.

Article 366

Accountability of Liquidators for Damage (1) Liquidators shall be accountable to the company's partners, members, shareholders and creditors for damages wrongfully caused to them by the liquidators in accordance with Articles 13-33 and 36 of this Law. (2) Liquidators shall not be liable for obligations of the company solely by reason of their being its liquidators. (3) Liquidators shall not be accountable to creditors, partners, members or shareholders of the company for losses, obligation or reduction in the value of property which resulted from the taking of conscientious and reasonable business decisions in connection with the conduct of the company's liquidation. (4) A claim against liquidators under paragraph (1) of this Article shall be barred if not made within one year from the date of deletion of the company from the Registry. (5) If more than one liquidator is liable for the same damage, they shall be liable jointly and severally.

Article 367 Notifying the Tax Administration

The liquidators of a company shall notify the proper tax authorities of the liquidation by submitting to them a copy of the report on liquidation and any other reports or documents required by law.

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PART FOUR

LINKING BUSINESS COMPANIES AND PERSONS

Chapter 7

LINKED COMPANIES AND PERSONS

Title 1

General Provisions Concerning Linked Companies and Persons

Article 368 Definition and Types of Linked Companies

(1) As used in this Law, the term “linked companies” means two or more companies which are linked either:

1) by ownership of share or partnership interests as stated in Articles 369 and 371-375 of this Law (companies linked by share in capital), 2) by contract, as stated in Articles 376-379 of this Law and the Law on Obligations (companies linked by contract); or 3) by both capital and contract (mixed linked companies).

(2) Linked companies as defined in paragraph (1) of this Article shall be deemed to include at least one controlling (dominant) company and one or more dependent companies. (3) Linked companies may be organized as concerns, holdings, business groups or other organization forms in accordance with provisions of this Law and the Law on Obligations. (4) Linked companies shall be deemed to be organized as concerns when the predominant business activity of the controlling company is other than management or control of dependent companies. (5) Linked companies shall be deemed organized as holdings when the parent company’s exclusive business activity is management or control of dependent companies. (6) Linked companies shall be deemed organized as business groups when the controlling company’s business activity includes activities referred to in both paragraphs (4) and (5) of this Article. (7) Linking of companies in violation of the Law on Monopoly is prohibited.

Article 369 Control by Share in Capital

(1) As used in this Law the term “controlling member or shareholder” of a limited liability company or a joint stock company shall mean a person who, either alone or pursuant to an arrangement or understanding with one or more other persons (“acting in concert”):

1) has more than 50% of the voting power in the company, which in a joint stock company shall mean ownership and power to vote more than 50% of the ordinary shares (majority vote); or 2) otherwise exercises a controlling influence over the management and policies of the company by virtue of his position as a member or shareholder (or on the basis of concluded contract in accordance with this Law and the law regulating obligations).

(3) A person who, alone or with one or more other persons, has more than 25% of the voting power of a company shall be presumed to exercise a controlling influence unless another person, alon or with one or more other persons, has greater voting power (significant voting power).

Article 370 Acting in Concert

(1) As used in this Law, the term “acting in concert” and similar terms includes action taken by two or more persons based on a joint agreement or understanding with the aim to acquire or relinquish or exercise voting rights of a person, or using voting rights for the purpose of executing joint effort on the management or business operations of that person or to the election of bodies of a company (or a majority of its members) or otherwise has influence on the conduct of business of that person. (2) It shall be presumed that persons specified in paragraph (1) of this Article acting in concert are:

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1) a company and its management body or a member of that body, individuals who are directly subordinated to the management body, member of the board of directors of that company, and a representative or liquidator of that company or related entities; 2) a person who has controlling participation capital or persons controlled by him; 3) persons who are influenced by the person with controlling capital participation who are under the control of the same person being controlled by another person; or 4) persons who make up the linked companies.

(3) Unless proved otherwise, it shall also be assumed that individuals who act in concert as defined in paragraph (1) of this Article are:

1) a limited liability company and its members or only its members; 2) a partnership and its partners or only its partners; 3) a limited partnership and its general partners, or only its partners; 4) family members as defined in Article 34, paragraph (2) of this Law; or 5)investment companies and investment funds or pension funds which are managed by the investment company, or only funds which are managed by one investment company.

(4) Persons (legal entities, natural) who act in concert shall be jointly and severally liable for the completion of their obligations that stem from this.

Title 2

Special Provisions for Companies Linked by Capital Share

Article 371 Disclosure to Dependent Company

(1) A company or other person that becomes or ceases to be a controlling member or shareholder of a company shall inform that company, the Securities Commission and the federal body for the prevention of monopoly thereof as required by the Law on Securities. (2) Such company or other person shall also inform the company and such bodies in other situation as required by the Law on Securities.

Article 372 Entry into Registry

A company or other person that is required to give notice under Article 371 of this Law shall also report the information to the Registry in accordance with the law regulating registration of commercial entities.

Article 373 Business Name

(1) A controlling member of shareholder shall identify the dependent companies that it controls and the fact of its controlling position in its business documents referred to in Article 22 of this Law. (2) A dependent company shall disclose the identity of any controlling member or shareholder, and the fact of such control, in its business documents referred to in Article 22 of this Law. (3) The obligations under paragraphs (1) and (2) of this Article shall end on termination of the controlling position.

Article 374 Liability of Controlling Company and Directors

(1) A controlling company shall be liable to a dependent company as provided in Article 33 of this Law. (2) Directors of a controlling company and a dependent company shall be liable to the company as provided in Articles 32 and 33.

Article 375 Reports to Members or Shareholders of a Dependent Company

(1) The board of directors of a dependent company shall present a written report to the annual shareholders’ assembly or members’ meeting of the company on the company’s relations during at least the previous fiscal year with all other companies to which it is linked by share in capital, as part of the board’s report on

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business activities of the company. Such report shall cover bothe the controlling company and any other companies which are jointly controlled. (2) If independent audit of annual financial reports of a dependent company is mandatory under the Law on Accounting, the same obligation shall apply to the company’s auditor.

Title 3

Provisions for Companies Linked by Contract

Article 376 Contract on Management and/or Transfer of Profit

(1) If a controlling company and a dependent company enter into a contract for management of the dependent company by the controlling company or on transfer of profit, in whole or in part, of the dependent company to the controlling company, the parent company shall be liable for damage caused to the dependent company under Article 377 of this Law. (2) A contract referred to in paragraph (1) of this Article shall be entered by the dependent company into the Registry and published in accordance with the law regulating registration of commercial entities. (3) Any such contract shall not come into force until the date of such registration and publication in accordance with Article 9 of this Law.

Article 377 Contents of and Liabilities Under the Contract

(1) A contract of the kind referred to in Article 376 of this Law must be in writing and shall specify rights and liabilities of the controlling company, measure for protection of the dependent company, the scope of any transfer of profit, measures for compensation to the dependent company or covering of the dependent company’s losses by the parent company, measures for protection of any minority members or shareholders of the dependent company, and measures for and protection of the dependent company’s creditors after termination of the contract. (2) Articles 32 and 33 of this Law shall apply with respect to the responsibility of the controlling company and and directors of the controlling and dependent companies, and any persons who act in concert with them, for damage caused to the dependent company, but this shall not limit or exclude any other remedies for breach of contract or otherwise which may be available under the law.

Article 378 Required Approval of the Contract

(1) A contract of the kind referred to in Article 376 shall be adopted by the members’ meeting or shareholders’ assembly of the controlling company and all dependent companies by a qualified majority as defined in Article 296, paragraphs (2) and (3) of this Law. (2) If the contracting party is a partnership or a limited partnership, the contract shall be approved by all partners with unlimited liability, unless provided otherwise in the Articles of Association or partnership agreement. (3) The following shall be included in the notice to members or shareholders of the meeting or assembly at which approval is to be given:

1) the text of the contract, which shall also be available at the session; and 2) other material information concerning the contract and the business operations of all other companies who are parties to the contract.

(4) A copy of the contract shall also be attached to the minutes of meeting of the assembly.

Article 379 Termination and Registration of Termination

(1) A contract of the kind referred to in Article 376 of this Law shall be terminated by agreement, expiration of term or otherwise in accordance with the contract and the Law on Obligations. (2) The termination of such a contract shall be entered into the Registry and published in accordance with the law regulating registration of commercial entities.

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PART FIVE

REORGANIZATION AND MAJOR TRANSACTIONS OF A COMPANY

Chapter 8

STATUS CHANGES

Title 1

General Provisions Concerning Status Changes

Article 380 Definition and Types of Status Changes

(1) As used in this Law, the term “status change” of a company means a merger, a division or a separation carried out by that company. (2) A merger may be either a merger by acquisition or a merger by formation of a new company.

1) A “merger by acquisition” is a status change whereby one or more companies cease to exist without being liquidated and simultaneously transfer to an already-existing company all their assets and liabilities in exchange for the issuance to their shareholders or members of shares in the acquiring company and possibly also a cash payment which may not exceed 10% of the nominal or accounting value of the shares so issued. A company which ceases to exist in such a merger is herein sometimes called an “acquired company”, and the company which survives is herein called an “acquiring company”. 2) A “merger by formation of a new company” is a status change whereby two or more companies cease to exist without being liquidated and simultaneously transfer to a newly-founded company all their assets and liabilities in exchange for the issuance to their shareholders or members of shares of the newly-founded company and possibly also a cash payment which may not exceed 10 % of the nominal or accounting value of the shares so issued. A company which ceases to exist in such a merger is herein called “a company terminated by merger” and the newly-founded company is herein called a “new company”.

(3) A division may be either a division by acquisition, a division by formation of one or more new companies, or a combination of those two operations. A company which is divided in a division is herein sometimes called a “company terminated by division”.

1) A “division by acquisition” is a status change whereby a company ceases to exist without being liquidated and simultaneously transfers to two or more already-existing acquiring companies all its assets and liabilities in exchange for the issuance to its shareholders or members of shares in the acquiring companies and possibly also a cash payment which may not exceed 10 % of the nominal or accounting value of the shares so issued. 2) A “division by formation of two or more new companies” is a status change whereby a company ceases to exist without being liquidated and simultaneously transfers to two or more newly-founded companies (or two or more companies with which it is merged into a new company) all its assets and liabilities in exchange for the issuance of shares of the acquiring companies and possibly also a cash payment which may not exceed 10 % of the nominal or accounting value of the shares so issued.

(4)A separation may be either a separation by acquisition, a separation by formation of one or more new companies, or a combination of the two. The provisions of this law on division by acquisition and division by formation of one or more new companies shall apply as appropriate to separation by acquisition and separation by formation of one or more new companies, unless otherwise provided in this Law.

1) A “separation by acquisition” is a status change whereby the separated company transfers one or more parts or its assets and accompanying liabilities to one or more existing companies, while the company remains in existence as a legal entity, and all or part of its shareholders or members, while adhering to the principle of equality, become shareholders or members of the acquiring company in exchange for shares of the separated company (and the reduction of its initial capital in that amount without application of the rule or regular decrease) for shares of the acquiring

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company and, possibly also a cash payment which may not exceed 10 % of the nominal or accounting value of the shares so issued. 2) A “separation by formation of one or more new companies” is a status change whereby the separated company transfers one or more parts of its assets and accompanying liabilities to one or more newly founded company in exchange for shares/contributions of the separated company (and the reduction of its initial capital in that amount without application of the rule of regular decrease) for issuance to its shareholders or members of shares or contribution in the newly founded companies and, possibly also a cash payment which may not exceed 10 % of the nominal or accounting value of the shares so issued.

(5) A merger, a division or a merger and a separation may be carried out simultaneously. (6) A decision on status change in accordance with this Law may not be contested due to disproportionately determined exchange of shares. (7) If companies with different legal forms participate in a status change, the provisions of this Law on change of legal form of companies shall apply as appropriate to the status change. (8) As used in this Law, the term “reorganization” means a status changes or a change of legal form.

Prohibition on Certain Status Changes Article 381

(1) A company is prohibited from carrying out prohibited merger in violation of the Law Regulating Monopoly. (2) A company is prohibited from carrying out a status change through division with the aim to retain a monopoly or dominant position in the market in violation of the law regulating monopoly.

Settlement Account

Article 382 (1) Each company participating in a status change shall prepare a financial statement stating its financial condition on an agreed date pursuant to the Law on Accounting. (2) The date referred to in paragraph (1) of this Article may be any date which is not more than eight months prior to the entry of the status change into the Registry.

Article 383 Status Change During a Liquidation

A company may carry out a status change while it is in liquidation so long as it has not begun distributing its assets to its shareholders, members or partners in the liquidation.

Title 2

Regular Merger by Acquisition of Joint Stock Companies

Section 1

Preparations

Article 384

Plan of Merger by Acquisition (1) The board of directors of each company participating in a merger by acquisition shall prepare a draft plan of merger. (2) The plan shall include:

1) the form, type, registered name and registered office of each company in the merger; 2) the share exchange ratio and the amount of any cash payment; 3) the terms of the allocation of shares in the acquiring company to shareholders of each acquired

company; 4) the date from which the holding of such shares entitles the holders to participate in profits of the

acquiring company and any special conditions affecting that entitlement; 5) the date from which the transactions of each acquired company shall be treated for accounting

purposes as being those of the acquiring company;

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6) the rights conferred by the acquiring company on the holders of shares to which special rights are attached and the holders of securities other than shares, or the measures proposed concerning them;

7) any special advantage or preference given to independent financial advisers or directors of any company in the merger; and

8) the Articles of Association and by-laws of the acquiring company as they will be in effect immediately following the merger.

Article 385

Board of Directors Report (1) The board of directors of each company participating in the merger shall also prepare a detailed written report including an explanation of the draft plan of merger with reference to the legal and economic grounds of the merger and exchange ratio of shares. (2) The above report shall particularly include a description of any difficulties encountered in the process of evaluation of companies participating in the merger, if such difficulties occurred. (3) The board of directors of each company which participates in a status change must inform the shareholders’ assembly of any material or financial changes in assets and liabilities between the date of the merger plan and the date of the meetings of the companies in the merger.

Article 386

Auditor’s Report (1) The draft plan (agreement) of merger and the report of the board of each participating company shall be reviewed by one or more independent auditors appointed by the competent court in a non-contentious procedure initiated by joint application of the companies. (2) The auditors shall prepare and submit to each company which participates in the merger by acquisition a written report on auditing of the merger not later than two months after the day of their appointment. (3) The audit report shall include the auditor’s opinion on whether the proposed exchange ratio of shares and any monetary payment is adequate and reasonable compensation to shareholders of the acquired companies for their shares. (4) In addition to the opinion referred to in provision of paragraph (3) of this Article, the audit report shall state:

1) the method of valuation of all companies participating in the merger by acquisition used to establish the exchange ratio of shares proposed in the draft plan of merger; 2) reasons for use of application of that particular valuation method, including reasons why that particular method is considered adequate in that particular case; and 3) any particular difficulties the auditor encountered in the process of valuation of the participating companies, if such difficulties occurred.

(5) The auditors shall be authorized to demand and receive from all of the companies in the merger all required data and documents necessary for successful completion of the audit, as well as to take any actions necessary for checking the accuracy and credibility of data and documents received from the companies, pursuant to the Law on Accounting.

Article 387

Supervisory Board Report If any company in the merger by acquisition has a supervisory board, the board of directors report

and the auditor’s report on the merger shall be reviewed by the supervisory board and it shall issue its own report on the subject.

Section 2

Decision-Making

Article 388 Announcement of Plan (Notifying Shareholders)

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The proposed merger shall be submitted to the Registry and published pursuant to the provisions of Article 9 of this Law by each participating company at least one month prior to the date set for the shareholders’ assembly at which the merger is to be voted on.

Article 389 Examination of Documents

(1) Each company participating in merger by acquisition, for at least one month prior to the shareholders’ assembly at which the merger is to be voted on, make available at its registered office for their shareholders to examine the following documents:

1) the draft merger plan; 2) amendments to be made to the Articles of Association and by-laws of the acquiring company; 3) the annual financial statements of all the participating companies for the previous three years; 4) a special settlement accounting statement which reflects the financial condition of each

company as of a date not more than three months before of the date of the draft plan of merger, if the latest annual financial statement was as of a date more than six months before the date of the draft plan of merger;

5) the reports of the boards of directors of all companies in participating in the merger by acquisition or their joint report on the subject;

6) the audit reports of all participating companies or their joint audit report; and 7) the report of the supervisory board of each participating company which has a supervisory

board. (2) The special settlement accounting statement referred to in paragraph (1), point 3) of this Article shall be prepared applying the same method and in the same form as the latest annual financial statement. (3) Assessments of value in the special settlement accounting report may be based only on changes in the accounting of the participating company compared to the situation stated in the latest annual financial statement, without need to make an inventory of its assets. (4) The special settlement accounting report shall, however, state the accounting decreases and increases of the company’s assets value occurring after the latest annual report, as well as all significant changes in the real asset value of the participating company which have not been stated in the company’s books. (5) Each company participating in the merger by acquisition shall provide to every shareholder at their request, with a copy free of charge of each document referred to in paragraph (1) of this Article.

Article 390 Shareholders’ Assembly Approval

(1) The draft plan of merger shall be adopted by the shareholders’ assembly of each company participating in the merger by acquisition by a qualified majority as defined in Article 296, paragraph (2) and (3) of this Law. Each company shall give notice of the assembly as provided in Article -- of this Law and shall state in the notice that the documents listed in Article 10 of this Law are available and shall state that the shareholders have the right to dissent and to appraisal and payment for their shares as provided in Article --. (2) If a company participating in the merger by acquisition has more than one type or class of shares, the merger plan shall be adopted by a qualified majority of shareholders of each class of shares whose rights are to be affected by the decision at a special voting session held for holders of that particular class of shares. (3) The draft plan of merger shall be adopted without variation by the assemblies of all companies participating in the merger by acquisition. (4) Signatures of authorized representatives of each participating company on the draft plan shall be certified. (5) All required changes in the Articles of Association and by-laws of the acquiring company shall be adopted together with the plan of merger and in the same manner. (6) The plan of merger shall be filed with the minutes of the assembly meeting of each company participating in the merger by acquisition at which the plan was adopted.

Article 391 Merger Without Decision of the Acquiring Company’s Assembly

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(1) A merger by acquisition may be carried out based solely on a decision of the board of directors of the acquiring company, without action by the acquiring company’s shareholders’ assembly, provided that:

1) the plan of merger is published pursuant to Article 9 of this Law at least one month prior to the shareholders’ assembly of each company to be merged at which the decision on merger is to be adopted; 2) the shareholders of the acquiring company office are able to examine at its registered office the merger plan, the annual financial statements of all participating companies for the previous three years, the special financial statement for the current year, the board of director’s report, the audit report on the merger and any supervisory board’s report, at least one month prior to the shareholders’ assembly of each company at which the decision on merger is to be adopted; and 3) one or more acquiring company’s shareholders whose participation in the initial capital of the company is at least 5% have not requested within 30 days after the date of the draft plan of merger that an extraordinary shareholders’ assembly of the acquiring company be held to decide on the merger.

(2) All the conditions referred to in paragraph (1) of this Article must be fulfilled.

Section 3

Execution of Merger by Acquisition

Article 392 Capital Increase

(1) If in a merger by acquisition the initial capital of the surviving company is to be increased, the increase shall be realized pursuant to the provisions of this Law on increase of the initial capital of a company by new investments, and the following provisions shall not apply to issuance of shares of the acquiring company to shareholders of an acquired company:

1) the provisions on prohibition of increase of the initial capital before the subscribed shares are fully entered into the initial capital; 2) the provisions on terms and conditions of subscription of new shares, on permission of the Securities Commission to issue shares, on public invitation on the prospect, on the evidence that the cash contributions paid-in, that is, registered in company’s initial capital as a fee for the application for entry into the Register, and other provisions incompatible with share replacement (exchange) in the merger; and 3) the provisions on the preemptive rights of shareholders of participating companies to acquire new shares.

(2) Shareholders who subscribed to shares in the acquired companies before the merger but did not pay for them in full before the exchange for the acquiring company’s shares, shall continue to be obligated to pay for those shares after the merger, under terms identical to those before the merger, unless otherwise provided in the plan of merger.

Article 393 Prohibition of Creating Phantom Capital

(1) If a company to be merged by acquisition own shares directly or indirectly in the acquiring company or vice versa, an increase of the initial capital of the acquiring company by the amount of shares it owns in the companies to be acquired as well as by the amount these companies own in the acquiring company is prohibited. (2) Shares of the companies to be acquired and vice versa shall be shares of the acquiring company after the merger. (3) The acquiring company shall not issue its shares for:

1) shares of the companies acquired owned by the company, whether directly or through third parties holding the shares in favor of the acquiring company; or 2) shares of the companies merged whether owned directly or indirectly through third parties in favor of these companies.

(4) The shares referred to in paragraph (2) of this Article shall be shares of the acquiring company pursuant to paragraph (2) of Article 227 of this Law.

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(5) The acquiring company may, with consent of the companies to be merged, exchange their shares for shares of the acquiring company the companies to be merged own in the acquiring company instead of issuing new shares in the process of exchange pursuant to proportion of exchange set in the merger plan.

Article 394 The Acquiring Company’s Initial Value

The values shown in the closing statement balance sheet of the merged companies shall be shown in the balance sheet of the acquiring company after the merger in accordance with the Law on Accounting.

Section 4

Protection of Creditors

Article 395 Right to Guarantees and Payment

(1) All creditors whose debts originated before the publication of the draft plan of merger shall have a right to demand in written form payment or guaranties of payment of the debts of a company in the merger, within 30 days from the date of the publication. (2) Creditors who have not demanded payment or guaranties within the term stated in paragraph (1) of this Article shall have a right to demand written guarantees of outstanding debts which are not due within six months from the date of the merger publication, if the merger puts payment at risk. (3) Creditors who have outstanding debts sufficiently secured and creditors who would have preferential claims in a bankruptcy shall not have the rights provided in the paragraphs (1) and (2) of this Article. (4) Creditors shall be notified of the above rights to payment or guaranties at the time of the publication referred to in paragraphs (1) and (2) of this Article. (5) Guarantees of debts can be provided to creditors using assets of acquired companies and the acquiring company. (6) The board of directors of the acquiring company shall manage the assets of each acquired company separately until the outstanding debts are paid or sufficiently secured for the creditors as provided in paragraphs (1) and (2) of this Article. (7) A creditor of each acquired company and the acquiring company shall have a preference in debt settlement from the assets of the company which was their original debtor, to the creditors of other companies merged in the merger. (8) If the board of directors of the acquiring company does not act in accordance with the above provisions of this Article, the competent court may order, on a complaint by creditors, that the merger shall not take place if the court finds that the merger puts the settlement of outstanding debts at risk.

Article 396 Security of Bondholders

The provisions of the foregoing Article of this Law on the right of creditors shall apply also to bond and debenture holders, except as otherwise provided in the decision on the issuance of their securities or otherwise agreed by the holders as referred to in paragraph (9) of Article 208 of this Law or by separate agreement.

Article 397 Security of Special Rights Holders

(1) The acquiring company shall secure to holders of securities other than shares of an acquired company, including convertible bonds, warrants, and other securities, the same rights after the merger unless otherwise provided in the decision on the issuance of their securities or otherwise agreed by the holders as referred to in paragraph (9) of Article 208 of this Law or by separate agreement. (2) If the acquiring company does not act in accordance with paragraph (1) of this Article, it shall be liable to reimburse the holders of special rights for the loss or modification of these rights according to their market value and, if they do not have a public market value, according to the value approved by the auditors of the merger.

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Section 5

Finalization of the Merger

Article 398 Registration

(1) Each acquired and acquiring company in a merger shall apply for registration of the merger in the Registry in accordance with the Law on Registration. (2) If a decision on merger by acquisition is contested, the Registry shall not terminate the registration procedure of the merger if it finds that there is a need for urgent decision-making and that other preconditions to register the merger have been accomplished. (3) When deciding whether the registration is urgent, the Registry shall take into consideration the safeguarding of rights in the contest proceedings, the probability of the complaining party’s success, and the damage to the companies arising from the postponement of the merger.


(1) The registration of a merger and its publication shall be in accordance with the Law on Registration. (2) If the acquiring company increases its initial capital on the basis of the merger, that increase shall be simultaneously entered with the registration of the merger. (3) The acquiring company shall enter the acquired companies’ shares into the Central Registry of Securities in the names of those companies’ shareholders.

Article 400 Effect of Merger

Upon registration of a merger by acquisition: 1) All of the acquired company’s assets and claims are transferred to the acquiring company

including the acquired company’s claims ageinst third parties; 2) the acquired company’s debts and other obligations to third parties are transferred to the

acquiring company, which becomes the debtor; 3) any mutual debts for those debts between an acquired company and the acquiring company

are annulled since the creditor and the debtor are merged into one entity; 4) the acquired company’s shareholders become shareholders of the acquiring company; 5) the acquired company ceases to exist without liquidation; 6) shares issued by the acquired company are cancelled and exchanged for shares of the

acquiring company and cash if the plan so provides; 7) third parties’ rights, such as liens and other rights, which encumber acquired company’s

shares, shall be passed onto the shares issued by the acquiring company to the same shareholders in exchange for encumbered shares, or they shall be realized as a cash settlement recognized together with or instead of the above share replacement/exchange as provided in the plan;

8) permissions, concessions, other benefits and exemptions provided for or acclaimed to the acquired company are transferred to the acquiring company, unless provided otherwise by the regulations governing issuance of licenses, concessions, benefits and exemptions;

9) functions of authorized representatives of shareholders of each company to be merged by acquisition, as well as functions of members of its board of directors and the supervisory board and its auditor shall be terminated along with the merged company and may be continued only in accordance with the merger plan; and

10) persons employed in the acquired company shall continue to work in the acquiring company in accordance with employment regulations and the plan of merger.

Title 3

Simplified Merger by Acquisition

Article 401

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Definition (1) A “simplified merger by acquisition” is a merger in which the acquiring company holds at least 90% of the voting shares of the acquired company, based only on the decision of the assembly of the company (companies) to be acquired and without the decision of the acquiring company’s shareholders assembly and without a merger audit. (2) In a simplified merger by acquisition, a decision of the acquiring company’s assembly and reports of the board of directors and supervisory board and a merger audit are not necessary if:

1) the draft plan of merger is published at least 30 days before the dependent company’s assembly takes place at which the merger is to be decided upon and, if the company is an open company, the announcement is published in at least one daily sold throughout Serbia in at least 100, 000 copies; 2) copies of the draft plan of merger, the annual financial statements of all acquired companies for the last three years and a separate accounting statement and made available free of charge to the acquiring company’s shareholders at the company’s registered office at least 30 days before the acquired company’s assembly at which the merger is to be decided on; and 3) one or more shareholders of the acquiring company holding at least 5% of the votes of shares entitled to vote on the merger, does not demand an assembly of the company in order to decide on merger within 30 days after the acquired company’s assembly has adopted the draft merger plan.

(3) It shall be considered that the acquiring company holds 90% of the dependent company if one or more other persons hold it in their name(s) but in favor of the acquiring company. (4) Except for paragraphs (1) – (3) of this Article, the provisions of this Law on the regular merger by acquisition procedure shall apply to a simplified merger by acquisition.

Article 402 Merger by Acquisition of a Wholly-Owned Dependent Company

(1) A wholly-owned dependent company may, by decision of its assembly, merge by acquisition with its parent company as its sole shareholder and acquiring company, pursuant to the previous Article on simplified merger by acquisition. (2) As an exception from paragraph (1) of this Article, a merger by acquisition of a completely dependent company with its parent company shall not require that draft plan of merger state the proportion of share exchange, mode of exchange and date from which shareholders of the acquired company shall acquire the right to participate in profit of the acquiring company. (3) In case of a merger by acquisition of a completely dependent company with its parent company, the provisions of this Law on liability of members of the board of directors, supervisory board and auditor shall not apply since the acquiring company, as the sole shareholder of the company to be merged by acquisition, shall not become its own shareholder by the merger.

Title 4

Merger by Acquisition of Limited Liability Companies

Article 403

Applicability of Other Articles (1) The provisions of this Law on merger by acquisition of joint stock companies shall apply mutatis mutandis to a merger by association of limited liability companies unless otherwise provided in this Law. (2) For purposes of paragraph (1) of this Article, a member of a limited liability company is considered to be the shareholder; his share in the company is considered to be the total of all shares the shareholder holds in a joint stock company; and a members’ meeting is considered to be a shareholders’ assembly.

Article 404

Preparation for Members’ Meeting (1) The directors of each limited liability company participating in a merger by acquisition shall not be required to submit to the Registry or publish the plan of merger pursuant to the Law on Registration.

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(2) The directors of each limited liability company participating in a merger by acquisition shall send to each member of the company, at least 15 days prior to assembly meeting at which the decision on the merger is to be approved, the following documents:

1) the draft plan of merger; 2) the annual financial statements of the companies to be merged for the past three years; 3) a special settlement accounting statement, which reflects the state of the company to be merged and the acquiring company on, or not more than three months before, the date on which the draft plan on merger was composed, if the latest annual balance of the companies refers to the business year, which ended more than six months prior to creation of the draft plan of merger; 4) each company’s report on merger by acquisition of each company to be merged and the acquiring company or their joint report; and 5) an auditor’s report, if an audit report is required and under the Law on Accounting for that particular company.

Title 5

Merger by Acquisition of Joint Stock Company and

Limited Liability Company

Article 405 Applicability of Other Articles

(1) One or more joint stock companies may merge by acquisition into a limited liability company as the acquiring company and one or more limited liability companies may merge by acquisition into a joint stock company as the acquiring company. (2) The provisions of this Law on merger by acquisition of joint stock companies and merger by acquisition of limited liability company shall apply mutatis mutandis to mergers referred to in paragraph (1) of this Article.

Article 406 Joint Stock Company as the Company to be Acquired by Merger

(1) If a limited liability company is the acquiring company and a joint stock company is a non-acquiring company, the plan of merger shall state the nominal value of the share to be provided to each shareholder of the company as a new member of the limited liability company. (2) If an open joint stock company is to be acquired by a limited liability company, it must convert into a closed joint stock company in the merger in accordance with this Law and the Law on Securities Markets, for the purpose of protection of shareholders and holders of other securities issued by the open joint stock company. (3) If a limited liability company as the acquiring company intends to replace shares owned by shareholders of the acquired joint stock company by assignment of its own shares rather than new ones, the limited liability company shall list all shareholders in the plan of merger, as its new members to be assigned its own shares, as well as the nominal value of each such assigned share.

Article 407 Limited Liability Company as the Company to be Acquired by Merger

If a joint stock company is the acquiring company and a limited liability company is a non-acquiring company, the merger plan shall state the nominal value of the shares of each member of the company and the number of shares of the joint stock company to be provided to him in accordance with the proportion specified in the plan.

Title 6

Merger by Formation of a New Company

Article 408

Merger of Joint Stock Companies by Formation of a New Company

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(1) The provisions of this Law on merger by acquisition of joint stock companies shall apply mutatis mutandis to merger of joint stock companies by foundation of a new company, unless otherwise provided in this Article. (2) For the purpose of paragraph (1) of this Article, the merged companies shall be considered to be acquired companies, the new company shall be considered to be the acquiring company and the plan of merger by formation of a new company shall be considered to be the plan of merger by acquisition. (3) Notwithstanding paragraph (1) of this Article, a merger by formation of a new company without decision of the shareholders’ assembly of the companies to be merged, and a merger by formation of a new company based upon application of provisions on simplified acquisition, are prohibited. (4) The plan of merger by formation of a new company shall serve as the Articles of Association of the new company founded. (5) The plan of merger by formation of a new company shall include, as parties to the plan, the merged companies, and shall state their registered names, registered offices, forms of organization and business purposes, regardless of the fact that they cease to exist by the merger by formation of a new company and that their shareholders shall become shareholders of the new company. (6) Besides the elements envisaged by this Law for plans of merger by acquisition, the plan of a merger by formation of a new company shall also include the items required for the Articles of Association of a joint stock company. (7) The plan of merger by formation of a new company, as the Articles of Association of the new company, shall also include provisions on special rights, founding costs, participation stakes in assets and rights and manner of bringing thereof into possession of the company from the Articles of Association of each company to be merged by formation of a new company. (8) The provisions of this Law on founding of a joint stock company shall apply mutatis mutandis to founding of the new company, except that in case of founding of the new company no permission of the Securities Commission shall be required with respect to exchange of shares of the merged companies with shares of the new company, unless, at the tame of merger by foundation of a new company, such shares are publicly offered for sale for the first time. (9) The companies to be merged by formation of a new company shall apply for entry of founding of the new company into the Registry. (10) By entering of the new company into the Registry, the merged companies shall be deleted.

Article 409

Merger of Limited Liability Companies by Formation of a New Company The provisions of this Law on merger by acquisition of limited liability companies, and provisions

of the previous Article shall apply mutatis mutandis to merger of limited liability companies by foundation of a new company.

Article 410

Merger by Formation of a New Company with Joint Stock Companies and Limited Liability Companies

(1) Merger by formation of a new company of one or more joint stock companies and one or more limited liability companies is permitted. (2) The provisions of this Law on merger by acquisition between joint stock companies and limited liability companies shall apply mutatis mutandis to merger by foundation of a new company referred to in paragraph (1) of this Article. (3) For the purpose of paragraph (2) of this Article, merged companies shall be considered to be companies that cease to exist by acquisition, the new company shall be considered to be the acquiring company and the plan of merger by foundation of a new company shall be deemed to be the plan of merger by acquisition, unless otherwise provided in this Article. (4) If the new company is a limited liability company, the provisions of this Law on merger by acquisition of joint stock companies shall apply mutatis mutandis to participation of the joint stock company in the merger by foundation of a new company. If the new company is a joint stock company, provisions of this Law on merger by acquisition of limited liability companies (by a joint stock company) shall apply mutatis mutandis to participation of the limited liability company in the merger by foundation of a new company.

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(5) Notwithstanding paragraphs (1) to (4) of this Article, merger by foundation of a new company without decision of assembly of the companies that are to cease to exist by the merger and merger by application of provisions on simplified merger by acquisition are prohibited. (6) The plan of merger by foundation of a new company shall serve as the Articles of Association of the new company. (7) The plan of merger by foundation of a new company shall include, as founders of the new company, the companies that have ceased to exist by the merger, including their registered names, registered offices, forms of organization and business purposes, although they cease to exist by the merger by foundation of a new company. (8) Besides the elements of the plan of merger by acquisition envisaged by this Law, the plan of merger by foundation of a new company shall also include elements envisaged by the articles of association of a joint stock company or a limited liability company. (10) The plan of merger by foundation of a new company as the Articles of Association of the new joint stock company shall also include provisions on special rights, founding costs, participation stakes in assets and rights and manner of bringing thereof into possession of the company from the Articles of Association of each company to be merged by foundation of a new company. (11) The provisions of this Law on founding of joint stock companies apply accordingly to founding of the new joint stock company, except that in case of founding of the new joint stock company, no permission of the Securities Commission is required with respect to replacement of shares of the merged companies with shares of the new company, unless, at the tame of merger by foundation of a new company these shares are publicly offered for sale for the first time. (12) Besides the elements envisaged by this Law for plans of merger by acquisition, the plan of merger by foundation of a new company of the new limited liability company shall also include elements envisaged for the Articles of Association of a limited liability company. (13) The provisions of this Law on registration and announcement of registration of joint stock companies shall apply, accordingly, to registration and announcement of registration of merger of a joint stock company with a limited liability company.

Title 7

Division by Acquisition of Joint Stock Companies

Section 1

General Provisions Concerning Division by Acquisition

Article 411 Applicability of Other Articles

The provisions of this Law relating to merger by acquisition shall apply mutatis mutandis to a division by acquisition, except as provided otherwise in this Section.

Section 2

Draft Plan of Division by Acquisition

Article 412

Form and Content (1) The board of directors of each company participating in a division by acquisition shall prepare a draft plan of division. (2) The plan shall include:

1) the form, type, registered name and registered office of each company in the division; 2) amendments to the Articles of Association and by-laws of each recipient company; 3) the share exchange ratio and the amount of any cash payment; 4) the terms relating to the allocation of shares in the recipient companies; 5) the date from which the holding of such shares entitles the holders to participate in profits and any special conditions affecting the entitlement;

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6) the date from which the transactions of the company being divided shall be treated for accounting purposes as being those of one or other of the recipient companies; 7) the rights conferred by the recipient companies on the holders of shares to which special rights are attached and the holders of securities other than shares, or the measures proposed concerning them; 8) any special advantage or preference given to financial advisers or directors of any company in the division; 9) the precise description and allocation of the assets and liabilities to be transferred to each of the recipient companies; and 10) the allocation to the shareholders of the company being divided of shares in the recipient companies and the criteria on which such allocation is based.

Article 413

Unallocated Assets and Liabilities (1) Where an asset is not allocated by the draft terms of division and where the interpretation of these terms does not make a decision on its allocation possible, the asset or the consideration therefor shall be allocated to all the recipient companies in proportion to the share of the net assets allocated to each of those companies under the draft terms of division. (2) Where a liability is not allocated by the draft terms of division and where the interpretation of these terms does not make a decision on its allocation possible, each of the recipient companies shall be jointly and severally liable for it.

Section 3

Decision-Making

Article 414

Shareholders’ Assembly Approval (1) The draft plan of division shall be adopted by the shareholders’ assembly of each company participating in the division by a qualified majority as defined in Article 296 of this Law. (2) If a company participating in the division has more than one type or class of shares, the plan of division shall be adopted by shareholders of each class of shares whose rights are to be affected by the decision at a special voting session held for holders of that particular class of shares, as provided in paragraph (1) of this Article. (3) The draft plan of division shall be adopted without variation by the assemblies of all companies participating in the division. (4) Signatures of authorized representatives of each participating company on the draft plan shall be certified. (5) The plan of division shall be filed with the minutes of the assembly meeting of each company at which the plan was adopted.

Article 415 Division Without Decision of a Recipient Company’s Assembly

(1) A division may be carried out based solely on a decision of the board of directors of a recipient company, without action by the recipient company’s shareholders’ assembly, provided that:

1) the plan is announced pursuant to Article 388 of this Law at least one month prior to session of shareholders’ assembly of the dividing company at which the decision on division is to be passed; 2) the shareholders of each recipient company are able to examine all of the documents referred to in Article 401, paragraph (2) of this Law; and 3) one or more recipient company’s shareholders whose participation in the capital of the company is at least 5% have not requested, within 30 days after the date the draft plan of the division, that a shareholders’ assembly be held to decide on the division.

(2) All the conditions referred to in paragraph (1) of this Article must be fulfilled.

Section 4

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Implementation

Article 416 Share Exchange

The provisions of Article 400, paragraph (1), point 6) of this Law relating to share exchange and withdrawal and cancellation of shares in a merger by acquisition shall apply mutatis mutandis to the share exchnge of the recipient company.

Section 5

Protection of Creditors

Article 417

Joint and Several Liability All of the recipient companies in a division shall be jointly and severally liable for all of the obligations and liabilities of the dividing company following the registration and effectiveness of the division, except as may be otherwise agreed by any particular creditor.

Section 6

Completion of Division

Article 418

Application for Registration (1) Each company in a division shall apply for registration of the division in the Registry in accordance with the Law on Registration. (2) If a decision on a division is contested, the Registry shall not terminate the registration procedure if it finds that there is a need for urgent decision-making and that other preconditions to register the division have been accomplished. (3) When deciding whether the registration is urgent, the Registry shall take into consideration the safeguarding of rights in the contest proceedings, the probability of the complaining party’s success, and the damage to the companies arising from the postponement of the division.


The registration of a division and its publication shall be in accordance with the Law on Registration.

Article 420

Effect of Division Upon registration of a division: 1) the transfer, both as between the company being divided and the recipient companies and as regards third parties, to each of the recipient companies of all the assets and liabilities of the company being divided such transfer shall take effect with the assets and liabilities being divided in accordance with the allocation laid down in the draft plan of division; 2) the shareholders of the company being divided become shareholders of one or more of the recipient companies in accordance with the allocation laid down in the draft plan of division; 3) employees of the divided become employees of a recipient company in accordance with the labor law and the plan of division; and 4) the company being divided ceases to exist.

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Title 8

Division by Formation of a New Company

Article 421 General Provisions for Division by the Formation of New Companies

(1) The Articles of this Law relating to division shall apply mutatis mutandis to division by formation of new companies and to a division in which both an already-existing company and a newly-founded company are recipient companies. (2) The draft plan of division and the Articles of Association and by-laws of each new company shall be approved at a shareholders’ assembly of the company being divided.

Title 9

Separation by Acquisition and Separation by Founding

a New Joint Stock Company

Article 422 Application of Other Articles

(1) The provisions of this Law relating to division by acquisition shall apply as appropriate to separation by acquisition of joint stock companies, whereas separation by foundation of new joint stock companies shall be governed by the provisions of this Law relating to division by founding a new company or merger with an existing company and thereby founding a new company, unless otherwise stipulated by this Law or unless the provisions of this Law provide otherwisey. (2) When the initial capital of the divided joint stock company is decrease due to separation, the draft plan of separation must also make provisions for the method of decrease of initial capital and the shares of the divided company. (3) The final account of the divided company and the initial balance sheet of the new company, i.e. the recipient company, as well as the initial balance sheet of the divided company showing the its assets and liabilities after the separation, have to be submitted with the draft separation plan of the joint stock company. (4) The time period between the day the final and initial balance sheets specified in paragraph (3) of this Article are compiled and the day of submitting an application for registration may not exceed eight months. (5) The Articles of Association of the divided joint stock company shall be amended in accordance with the provision of this Law relating to the amendments of Articles of Association of a company. (6) Separation by foundation or separation by acquision of joint stock companies shall be entered into the Registry only after the decrease of initial capital of the divided company has been registered.

Title 10

Division and Separation of Limited Liability Company

Article 423 Application of Other Articles

The provisions of this Law on division of joint stock companies shall apply mutatis mutandis to division of a limited liability company.

Title 11

Division and Separation of Joint Stock Company and Limited Liability Company

Article 424

Mixed Division

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(1) Division and separation of a joint stock company into two or more limited liability companies or a combination of the two forms, and the division and separation of a limited liability company into two or more joint stock companies or a combination of both forms are permitted. (2) The provisions of this Law on division and separation of joint stock companies and limited liability companies shall apply mutatis mutandis to division referred to in paragraph (1) of this Article.

Title 12

Status Changes and General and Limited Partnership

Article 425

Merger, Division and Separation Involving General and Limited Partnership (1) A general or a limited partnership may merge with a joint stock company and a limited liability company. (2) The above mergers shall be subject to the provisions of mergers of limited liability companies, unless otherwise provided in this Article. (3) For the purpose of the provision of paragraph (2) of this Article, a general partnership or a limited partnership acting as parties to a merger shall be deemed a limited liability company. (4) Any merger of a joint stock company, whether it is an acquired or an acquiring company, and a general, i.e. limited partnership shall be subject to the provisions of mergers of joint stock companies, unless otherwise provided in this Article. (5) If a listed company is to merge through acquisition with a general partnership or a limited partnership or consolidate therewith, the joint stock company shall meet any requirements set forth with respect to going private pursuant to this Law and the Securities Law. (6) A plan of merger involving a general or a limited partnership shall be adopted respectively by all constituent parties upon approval of shareholders, i.e. members who have unlimited liability toward third parties and those who shall have unlimited liability toward third parties in the entity arising from the merger, which entity shall be the legal successor of each party to the merger. (7) A status change by division and separation of a general or limited partnership, limited liability company, or joint-stock company resulting in one or more general or limited partnerships shall be subject to the provisions of paragraphs (1) to (6) of this Article and the provisions of status change by dissolution of limited liability companies and joint stock companies.

Chapter 9

CONVERSION

Title 1

General Provisions Concerning Conversion of Legal Form

Article 426 Definition

As used in this Law, the term “conversion” (change of legal form, transformation) of a company means a change of the company’s legal form.

Article 427

Conversion and Liquidation (1)A company shall not be liquidated upon conversion. (2) A company may carry out a conversion while it is in liquidation so long as it has not begun distributing its assets to its shareholders, members or partners in the liquidation.

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Article 428

Registration and Publication (1) The company’s articles of conversion shall be filed with the Registry and the notice of registration published as provided in Article 9 of this Law. (2) Upon conversion, the company shall continue its operations as a company whose form has changed.

Article 429

Relevance and Exemption from Court Annulment (1) Upon conversion of a company the provisions of this Law relating to formation of a company in the new form shall apply mutatis mutandis. (2) The articles of conversion may not be annulled on the ground of disproportionate share exchange ratio pursuant to this Act.

Title 2

Special Provisions

Section 1

Conversion of Joint Stock Company into Limited Liability Company

Article 430 Conversion of Joint Stock Company into Limited Liability Company

(1) A joint stock company may be converted into a limited liability company in the following manner: 1) The board of directors of the joint stock company shall adopt a resolution setting forth a conversion plan meeting the requirements of Article 431 of this Law. The resolution shall require adoption and approval of the proposed plan by a shareholders’ assembly. 2) The company shall give notice of such meeting to all shareholders in accordance with paragraph (1) of Article 284 of this Law. Such notice shall state that the reason or a reason for convening the meeting is to consider the conversion plan. Such notice shall be sent not less than 30 days prior to the day determined for the meeting to be held. In addition to and together with the notice for convening the shareholders’ assembly, the shareholders shall be sent copies or given access to copies as provided in Article 284 of this Law of the following:

a) a plan of conversion together with a report explaining the terms and conditions and the legal and the economic basis for conversion as well as a description of any problems encountered during the assessment regarding the conversion of terms and conditions; b) any recommendations by the board of directors regarding the conversion plan and the reasons for such recommendations; and c) a statement of the right of the shareholders to dissent from the conversion plan and their right to assessment and remuneration for their shares, as provided in Articles 444-446 of this Law.

(2)The conversion plan shall be put to a vote at a general meeting of shareholders of the joint stock company to be converted. The plan shall approved and adopted if it receives the affirmative vote of a qualified majority as defined in Article 296, paragraph (2) and (3) of this Law. If the company has more than one class of shares, the conversion plan shall be adopted by the shareholders of each class whose rights are affected by the conversion in accordance with paragraph (1) of this Article. (3) Approval and adoption of the converstion plan by the shareholders of the joint stock company to be converted shall be an essential condition for completion of the conversation. Approval and Adoption by

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such shareholders must also include approval of the Articles of Association and, if applicable, the company agreement of conversion as they will be in force immediately after the completion of the limited liability company conversion.

Article 431

Contents of the Conversion Plan A conversion plan shall contain the following: 1) The company name, head office and address of joint stock company to be converted and the limited liability company into which the joint stock company will be converted; 2) The terms and conditions of the conversation; 3) The manner and the terms of converting the shares of the joint stock company following the conversation into shares of the limited liability company or into cash or other property; and the method by which such shares or other forms of payment are paid to the shareholders of the joint stock company; 4) The full text of the Articles of Association and, if applicable, the company agreement of the limited liability company as they will be in effect immediately after the conversation is completed; and 5) Any provisions by which the conversation may be abandoned prior to its completion.

Article 432

Registration and Coming into Force (1) Following the completion of the conversion pursuant to Article 430 of this Law, the limited liability company shall submit a report on the transformation to the Registry for the purpose of the registration. The report must be signed by the president of the board of directors or any director of the joint stock company and a director of the future limited liability company. The report on the conversion shall contain following:

1) the company name, registered office and address of the joint stock company and the limited liability company; 2) a copy of the conversation plan; 3) a copy of the minutes of the assemblies of the shareholders of the joint stock company at which the plan was considered and approved; 4) a copy of the Articles of Association of the surviving company which is to enter into force immediately after the completion of the conversation; and 5) a statement that the conversation plan was adopted and approved by shareholders of the joint stock company.

(2) Once the requirements of paragraph (1) of this Article are met, the Registry shall immediately register the plan of conversion and the Articles of Association of the limited liability company in the Registry. (3) The conversion shall enter into force and its legal consequences shall be occur immediately upon the registration in the Registry and publication in accordance with Article 9 of this Law.

Article 433 Legal Effect of Conversion

Immediately when conversion becomes effective: 1) the companies participating in the conversion shall be a single company, being the limited liability company identified in the conversion plan, and the joint stock company shall cease to exist as a legal entity; 2) the limited liability company shall have all assets and be responsible for all liabilities of the joint stock company; 3) all court and other proceedings and all claims against the joint stock company shall continue against the limited liability company, which, in every case, shall be the legal successor of the joint stock company; 4) the articles of association and, if applicable, the company agreement included in the conversion plan shall be the articles of association and, if applicable, the company agreement of the limited liability company; and

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5) the shares of the joint stock company shall be converted into shares of the limited liability company as stated in the plan. 6) the holders of convertible bonds, warrants with preemptive purchase rights, other bonds and securities other than shares, shall be entitled to at least the same special rights after the change of legal form, unless otherwise stipulated in the decision on issuance of such securities or if otherwise agreed with their owners in accordance with paragraph (9) of Article 208 of this Law.

Section 2

Conversion of a Joint Stock Company into a Partnership or Limited Partnership

Article 434 Assumptions

(1) A joint stock company may change legal form into a partnership or limited partnership by a unanimous decision of all shareholders who will be general partners in the partnership. (2) The decision of the joint stock company on change of legal form of that company shall state which shareholders shall be general partners and which shall be limited partners.

Article 435 Effect of Registration and Publication

By filing into the Registry and publishing the registration of the change of legal form of a joint stock company into a partnership or limited partnership:

1) the joint stock company continues as a partnership or limited partnership and thereby ceases to exist as a joint stock company; 2) a partnership or limited partnership is the legal successor to the joint stock company; 3) all powers of the joint stock company bodies shall be terminated; and 4) other legal consequences shall set in accordance with the nature of the partnership or limited partnership formed by change of legal form of the joint stock company.

Section 3

Conversion of Limited Liability Company into Joint Stock Company

Article 436

Resolution on Conversion of Limited Liability Company into Joint Stock Company (1) For the purpose of converting a limited liability company a resolution or the amendment of the Articles of Association of the company must be adopted by the members’ meeting. (2) The provisions of this Law pertaining to the conversion of a joint stock company into a limited liability company shall apply as appropriate to the conversion of a limited liability company into a joint stock company. (3) The provisions referred to in Article 236 and 237 of this Law shall apply to the basic capital and the nominal amount of the shares. (4) The resolution referred to in paragraph (1) of this Article, in addition to the change in form shall, also, include other amendments to the Articles of Association or company agreement necessary for the conversation of the limited liability company into a joint stock company shall be attached to the resolution.

Article 437 Registration and Appointment of the Bodies

(1) For the purpose of registration in the Registry, the appointment of the members of the board of directors of the joint stock company shall be reported together with the resolution on conversion of the limited liability company into a joint stock company. (2) Acts on appointment of the members of the board of directors of the joint stock company shall be attached in original or certified transcript. (3) Registration of the conversion of a limited liability company into a joint stock company shall be in accordance with Article 9 of this Law.

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Article 438 Conversion of Contributions into Shares

(1) Following the registration of the conversion, the limited liability company shall continue operating as a joint stock company. Contributions of the limited liability company shall become shares of the joint stock company. (2) The contributions of a limited liability company shall be converted into shares by deletion from the book of shares and recording in the Central Securities Registry. (3) Conversion of contributions into shares and merging of contributions shall not require the approval by the Securities Commission.

Article 439

Conversion of Limited Liability Company into General or Limited Partnership Conversion of a limited liability company into a general or limited partnership shall be subject to

the provisions of conversion of a joint stock company.

Section 4

Conversion of General or Limited Partnership into Joint Stock Company or Limited Liability Company

Article 440

Assumptions (1) By resolution of all partners, a general or limited partnership may be converted into a joint stock company or a limited liability company. (2) Unlimited liability of equally liable partners in a general or limited partnership shall remain for the converted entity's debts until the registration of conversion and publication of registration in accordance with Article 9 of this Law. (3) The effect of conversion of a general or limited partnership into a joint stock company or a limited liability company shall be subject to the provisions on conversion of said entities.

Article 441

Conversion of General Partnership into Limited Partnership and Vice Versa (1) Conversion of a general partnership into a limited partnership and vice versa shall be deemed effective if approved by all members and provided that general requirements for this conversion pursuant to this Act have been met. (2) The effect of conversion of a general partnership into a limited partnership and vice versa shall be subject to the provisions of conversion of the entities.

Chapter 10

OTHER MAJOR TRANSACTIONS

Article 442

Definition of Major Transaction (1) As used in this Law the term “major transaction” of a company means any transaction or related series of transactions which results in an acquisition or disposal of assets of the company, not made in the regular course of the company’s business, the full value of which, at the time the company decided to complete the transaction, amounted to at least 50% of the book value of the company’s assets as determined by the most recently prepared net balance sheet.

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(2) As used in this definition the term “assets” includes any property of the company which has monetary value including but not limited to real estate, movables, property or other rights including intellectual property or contract rights, shares or other interests in another company, or money. (3) As used in this definition, the terms “acquisition or disposal” mean acquisition or disposal by any means including but not limited to sale, lease, exchange, pledge or mortgage.

Article 443 Procedure for Approval of Major Transaction of a Joint Stock Company

(1) Any major transaction by a joint stock company shall be authorized in the following manner: 1) The board of directors of the joint stock company shall adopt a resolution recommending the transaction. The resolution shall require approval of the transaction by the shareholders’ assembly. 2) The company shall send notice of such assembly to all shareholders in accordance with Article 284 of this Law. Such notice shall state that the reason or a reason for convening the assembly is to consider the proposed transaction. Such notice shall be sent not less than 30 days prior to the day determined for the meeting to be held. In addition to and together with the notice for convening the assembly, the shareholders shall be sent copies or provided access to copies of the following:

a) a report explaining the terms and conditions of the transaction; b) the recommendations by the board of directors regarding the transaction and the reasons for such recommendations; and c) a statement of the right of the shareholders to dissent from the transaction and their right to appraisal and payment for their shares as provided in Articles 444-446 of this Law.

3) The transaction shall be put to a vote at the shareholders’ assembly. The assembly may authorize the transaction as it was presented or may authorize the board of directors to fix the terms and conditions of or the consideration to be received for the transaction. The transaction shall be approved by a qualified majority and, if a particular class of shares is entitled to group voting, the transaction shall be approved if it receives the affirmative vote of a qualified majority of the votes of the shares of each group entitled to group voting on the plan and at least a qualified majority of the total sum of votes of the voting shares for the plan. 4) Group voting in a company shall be required whenever so stated in the founding document of the company or and whenever required by Article 343 of this Law.

(2) Approval and adoption of the transaction by the shareholders of the joint stock company shall be an essential condition for completion of the transaction. (4) A copy of agreements for the transaction shall be filed with the minutes of the assembly.

Chapter 11

Right to Dissent and Receive Payment for Shares

Article 444 Mandatory Right of Shareholders of a Joint Stock Company

(1) A shareholder of a joint stock company may require payment from the company in an amount equal to the full value of his shares if he voted against or otherwise refrained from voting for:

1) an amendment to the Articles of Association of the company that adversely affects his rights in the manner stated in Article 343 of this Law and on which he had a right to vote; 2) a completed merger, division or separation of the company on which he had the right to vote; 3) a completed conversion of the company on which he had the right to vote; 4) a completed major transaction on which he had a right to vote; or 5) any other company action that is taken pursuant to a shareholder vote if the company’s Articles of Association provides that shareholders are entitled to dissent and obtain payment for their shares under this Article.

(2) A shareholder who is entitled to payment pursuant to this Article may not challenge the above-mentioned action which creates his rights under this Article, unless the action is fraudulent, illegal or constitutes a violation of Article 33 of this Law.

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(3) For the purposes of this Article full value shall be calculated as of the date the decision approving the company action in question was adopted by the shareholders assembly not taking into consideration any projected increase or decrease in value as a result of the action. (4) If the action on the basis of which the rights arose pursuant to this Article is subject to voting by the shareholders the written notification for the voting shall contain a statement that the shareholders assembly have or may have such rights, and the notification shall also include a copy or reference to this Article of the Law. (5) A shareholder who wishes to exercise rights under this Article shall send to the company, prior to the voting, a written notification of his intention to request payment for his shares if the proposed action is undertaken. The shareholder who fails to satisfy these requirements or votes in favor of the proposed actions shall not be entitled to payment pursuant to this Article. (6) If the action on the basis of which the rights arose pursuant to this Article is approved by the shareholders’ assembly, the shareholder who submitted written notification of his intention to request payment pursuant to paragraph (5) of this Article shall, within 30 days following the voting, send the company a written request for payment for the purchase of the shares that belong to him, stating his name and address, and the number and type of shares for which payment is requested. If the shares are in a dematerialized form, the company shall be entitled to prohibit the transfer of ownership records until the payment is executed pursuant to this Article. A shareholder who fails to meet these requirements shall not be entitled to payment pursuant to this Article. (7) The company shall, within 30 days following the receipt of the request referred to in paragraph (6) of this Article, pay each shareholder satisfying the requirements of this Article, an amount that the company believes to be the full value of his shares. The payment shall be accompanied by the most recent annual and any subsequent balance sheet and financial statement of the company. (8) If the shareholder satisfies the requirements referred to in this Article but believes that the amount paid is lower than the full value of his shares determined pursuant to this Article or if the company fails to make the payment, he shall be entitled, within 30 days following the date or due date of such payment, to request an assessment of the share value by the competent court by filing a request to the court within this 30-day period. Such a request shall be made in the form of an action by the shareholder against the company. The shareholder must state in his request his estimate of the full value of his shares for purposes of this Article, and the company must give immediate notice of the request to all other shareholders who have properly dissented under this Article. The court shall have the power to determine the full value and to order the company to pay it. The court shall also have the power to engage appraisers or other experts to recommend a decision and shall have the power to determine who shall pay the fees and expenses as between the company and the dissenting shareholder or shareholders. (9) A court decision under paragraph (8) shall be published in accordance with Article 9 of this Law and shall apply to all properly dissenting shareholders if the value determined by the court is higher than the amount the company offered under paragraph (7).

Article 445 Determining Full Value

(1) For purposes of this Law, the term “full value” of property or rights, including the shares or other securities of a company, shall be the price at which a seller, having complete information on the value of the property or the rights and not being obliged to sell them, would agree to sell them, and the price at which a buyer, having complete information on the value of the property and the rights and not being obliged to buy them, would agree to buy them. (2) The full value referred to in paragraph (1) of this Article shall be determined in the case of a joint stock company by the board of directors of the company unless, pursuant to the Articles of Association of the company or this Law, the determination is made by the competent court through the use of an appraiser, court or other person or body. (3) If one or more members of the board of directors has a personal interest in executing the transaction on the basis of which full value is paid to a shareholder, the determination shall be performed by the members of the board of directors not having such interest. (4) The persons determining the full value may engage an authorized appraiser to assist them in the determination and shall engage an authorized appraiser in the event that payment is required pursuant to Article 444 of this Law.

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(5) When determining the full value of the shares or other securities of a company, if the selling price or the supply and demand price is regularly announced at the stock exchange or other organized markets, such price shall be taken into consideration. When determining the market value under other circumstances, the price the buyer, having complete information on the total value of all shares of the company, would agree to pay for all shares of the company and all other factors the party or parties determining the price deemed to be important may be taken into consideration.

Article 446

Optional Rights of Members of a Limited Liability Company or Partnership (1) The provisions of Articles 444 and 445 of this Law may be adopted in the Articles of Association, company agreement or partnership agreement of a limited liability company or a general or limited partnership, or in an agreement on conversion of these companies (merger, acquisition, division, separation and change of legal form). (2) In such case the provisions of Articles 444 and 445 shall apply mutatis mutandis to the members or partners and to their shares or partnership interests, except to the extent that the Articles of Association or other agreement provides otherwise.

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PART SIX

Chapter 12

TRANSITIONAL AND FINAL PROVISIONS

Title 1

General Provisions

Article 447 Continued Work of Enterprises and Entrepreneurs and

Duty to Harmonize with this Law (1) Existing companies and other forms of organization and association for performing economic activity as well as entrepreneurs shall on the date of coming into force of this Law continue to work in the manner and under the conditions under which they were entered into the Registry. (2) The enterprises and other forms or organization and association referred to in paragraph (1) of this Article as well as entrepreneurs are bound to harmonize their legal form, the bodies, shareholders and members, capital, shares and stakes, business name, memoranda, parts of enterprises with special authorities in legal transactions, as well as their general deeds and founding agreements with the provisions of this Law within two years of the date of the coming into force of this Law, unless otherwise prescribed by this Law. (3) If the existing companies and other forms of organization and association referred to in paragraph (3) of this Article are organized as a limited liability company or a joint stock company, during re-registration they shall not be obliged to submit evidence on meeting the requirements in terms of the pecuniary portion of fixed capital laid down in Article 110 and Article 236, paragraphs (1) and (2) of this Law. (4) The existing companies and other forms of organization and association for purposes of performing commercial activities, as well as entrepreneurs who fail to act in accordance with the provisions of paragraph (2) of this Article shall cease to operate and the court, after liquidation proceedings carried out at the cost of the subject of liquidation, instituted ex officio by the Registry, shall be deleted from the Registry.

Article 448 Instituted Proceedings

If the establishment or changes of founders, shareholders and company members were submitted to the Registry, as well as the procedure for the election of the bodies and of enactment of general deeds of an enterprise and other forms of organization for the purpose of performing the economic activity by the date of the commencement of the application of this Law, they will be finalized pursuant to the provisions of the regulations in force at the time of such submission to the Registry.

Title 2

Transitional Status of Companies with

Socially Owned Capital

Article 449 Socially Owned Capital

(1) Socially owned capital shall be expressed in shares or interests of a stated value and shall be entered in the Registry.

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(2) The shares or interests referred to in paragraph (1) of this Article shall have no status of shares or interests owned by company under this Law.

Article 450 A Company with a Majority Socially Owned Capital and

a Socially Owned Company (1) As defined in this Law, a company operating with a majority of socially owned capital shall be understood to mean a socially owned company. (2) The business name of a socially owned company shall, as a rule, contain the designation of a socially owned company (“d.p.”). (3) The provisions of this Law pertaining to the bodies of an open joint stock company, shall be applicable to the bodies of a socially owned enterprise accordingly.

Article 451 Use of the Rights Contained in Shares or Stakes

on the Basis of the Socially Owned Capital by Employees (1) Based on the shares or interests wherein socially owned capital is expressed, all employees in a company which fully or partially operates with socially owned capital, shall exercise the following rights:

1) to participate in the management of the enterprise; and 2) to acquire free of charge part of the shares or interests in the socially owned capital privatization procedure

(2) The employees in a company shall exercise their right to manage the company on the basis of the shares or interests wherein the socially owned capital is expressed through one or more of their representatives in the shareholders’ assembly. (3) The employees shall exercise the right of free acquisition of shares or stakes of the socially owned capital pursuant to the law governing privatization.

Article 452 Use of the Rights Contained in Shares or Stakes

of the Socially Owned Capital by the State (1) On the basis of the shares or interests wherein socially owned capital is expressed, the State shall, directly or indirectly, exercise:

1) the right to participate in the management of a company with a majority socially owned capital; 2) the right of distribution of assets which remain following the bankruptcy or liquidation of a company with a socially owned capital; and

3) the exclusive right to regulate and conduct the socially owned capital privatization procedure (2) The consent of the Agency for Privatization shall be required for decisions of a socially owned company on: 1) changes of status and form of company; 2) increase or decrease of initial capital; 3) reorganization or restructuring; 4) founding of new companies; and 5) investment and sale of property, including sale of shares and interests in other companies, mortgages and pledges of property, long-term lease, settlement with creditors, or taking out or approving credit or issuing warrants when the value of these legal transactions exceed 10% of the net value of the company’s assets as stated in the most recent balance sheet. (3) The Agency for Privatization shall appoint representatives of socially owned capital in the assembly and the board of directors when it determines that the company body dealing with socially owned capital has adopted a decision making the implementation of the privatization procedure is significantly impeded or prevented, as well as when this body fails to adopt the decision or to take other measures in the privatization procedure in accordance with the law regulating privatization. (4) The decision making the implementation of privatization procedure significantly impeded or prevented shall be deemed null and void. (5) Upon the completion of the proceedings for the liquidation or bankruptcy of a company with full or part of the capital thereof socially owned, the State shall be entitled to receive the full or prorated

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residual assets of the company after the costs of the proceedings have been covered and liabilities towards the creditors settled. (6) Transfer, i.e. privatization of shares or stakes on the basis of socially owned capital shall be within the exclusive competence of the Agency for Privatization, and revenues generated from sale of the socially owned capital, remaining after the coverage of the costs of sale, shall belong to the State and be distributed in accordance with the law regulating privatization.

Article 453

Privatization and Termination of Socially Owned Capital

(1) Companies operating with socially owned capital shall be obliged to initiate privatization of shares or stakes of the socially owned capital in accordance with the law regulating privatization of socially owned capital. (2) A company with a majority or exclusive socially owned capital the cumulative loss whereof amounts to no less than 30% of the socially owned capital or which suffered a loss in excess of 5% of the value of the socially owned capital in the previous business year, shall initiate a privatization procedure pursuant to the law governing privatization within 60 days from the coming into force of this Law. (3) If a socially owned company is privatized through restructuring, the restructuring program must be approved by creditors whose unsecured claims constitute more than 50% of total unsecured claims. Alternative: delete paragraphs 2 and 3

Article 454 Controlling Company and Subordinated Company with

Socially Owned Capital A controlling company with socially owned capital in possession of a majority of shares or

interests in a dependent company shall, at the expense of the socially owned capital it operates, assign without compensation the shares or interests to the dependent company, provided that this is required by the dependent company undergoing privatization and under the condition that the company assigning shares or stakes has obtained the consent from the creditors thereof.

Article 455 Expiration of the Privatization Terms

(1) Upon the expiration of legal terms for the completion of privatization, the State shall become the exclusive owner of the non-privatized shares and interests in the socially owned capital which it shall privatize in compliance with the regulations on privatization. (2) The enterprise referred to in paragraph (1) of this Article shall be organized as an association of capital in conformity with this Law.

Title 3

Transitional Status of a Public Company

Article 456 Appraisal of Capital and Entry in the Registry

(1) Companies founded pursuant to the Law on Public Enterprises and Pursuit of Activities of General Interest (“The Official Gazette of the Republic of Serbia”, no. 25/2000 and 25/2002) by the State or local governments for the purpose of pursuing activities of general interest (hereinafter referred to as “public enterprises”) shall appraise their assets and liabilities and determine against the net assets value of a company the value of the state-owned capital of a public company. (2) The founders of public companies shall enter in the Registry the capital determined in the manner referred to in paragraph (1) of this Article and divided into shares or expressed as interests, within a two-year period from the coming into force of this Law.

Article 457 Change of Name, Bodies and Founding Acts

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(1) Within the time limit set out in Article 456, the term “public company” and the relevant designation (“j.p.”) shall be deleted, whereas the name of a company’s activity, determined pursuant to the law as an activity of general interest, shall be retained in the name of the company and, if applicable, additionally stressed. (2) Within the time-limit referred to in Article 456 of this Law, a public company shall adjust its founding acts and bodies thereof to conform with the provisions of this Law.

Article 458 Corporatization

Upon the expiration of the term referred to in Article 456 of this Law, i.e. cessation of the existence of public companies, all relevant provisions of this Law pertaining to joint stock companies or limited liability companies, as well as the provisions of this Law regulating the pursuit of activities of general interest and special laws on the pursuit of some of these activities, shall be applicable to State-owned enterprises pursuing activities of general interest.

Title 4

Other Transitional Provisions

Article 459 Limitations to Founding of Companies

(1) The following may not be founders or partners of a partnership or general partners of a limited partnership:

1) non-privatized companies and public companies; 2) companies with majority state or socially owned capital; 3) privatized companies without at least one shareholder or member of a company with significant capital participation as defined in paragraph (2) of Article 369 of this Law.

(2) Commercial companies which have founded other companies, or commercial companies specified in paragraph (1) of this Article, or the companies which have been founded by them and which do not have at least one shareholder or member who is a natural person with significant capital participation, or legal entity with privatized initial capital, so that it has at least one shareholder or member with significant capital participation may also not be founders and partners of a partnership and general partners of a limited partnership.

Title 5

Final Transitional Provisions

Article 460

Termination of Existing Law The Enterprise Law ("The Official Gazette of the FRY", Nos. 29/76, 29/97, 59/98, 74/99,

9/2001 and 36/2002), shall be replaced by this Law valid on the date this Law enters into force, but the Enterprise Law shall continue to apply until this Law is applied as provided in Article 461.

Article 461

Entry into Force of the Law This Law shall enter into force eight days after its publication in the "Official Gazette of

the Republic of Serbia" and shall be applied beginning six months after coming into force.

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